Using the following information, determine the ownership and operating costs for a hydraulic excavator.

Question

Actual cost (delivered)—$172,600
Horsepower rating—245 hp
Salvage value—$17,200
Useful life—8 years at 1,600 hours per year
Total interest—6.5 percent per year
Insurance—$2,589 per year
Taxes—$3,020 per year
Storage—$2,157 per year
Fuel cost—$3.65 per gallon
Fuel consumption rate—0.04 gallons per hp per hour
Power utilization—60 percent
Use factor—50 minutes per hour (83.33 percent)
Lubrication—7 quarts of oil at $4.65 per quart
Oiler labor—2.9 hours at $31.27
Lubrication schedule—every 150 hours
Oil filter—$10.95
Grease—1 tube per 8 hour shift at $8.50
Air filter—$22.50 changed every 450 hours
Repairs to equipment—75 percent over useful life

Answer 1

The ownership costs are as follows:



Find the depreciation and interest cost per hour:





Depreciation & interest cost = $26,640 / 1,600 hr = $16.65 per hr



Find the hourly cost per hour for taxes, insurance, and storage:



Taxes cost = $3,020/ 1,600 hr = $1.89 per hr



Insurance cost = $2,589 / 1,600 hr = $1.62 per hr



Storage cost = $2,157 / 1,600 hr = $1.35 per hr



Total ownership costs = $16.65 per hr + $1.89 per hr + $1.62 per hr + $1.35 per hr

Total ownership costs = $21.51 per hr



The operating costs are as follows:



Fuel cost = 245 hp × 0.8333 × 0.60 × 0.04 gal per hp per hr × $3.65/gal = $17.88 per hr



Lubrication cost = 7 quarts of oil × $4.65/quart = $32.55



Labor cost = 2.9 hr × $31.27/hr = $90.68



Oil filter = $10.95



Total cost for oil change = $32.55 + $90.68 + $10.95 = $134.18



Cost per hour = $134.18 / 150 hr = $0.89 per hr





Air filter cost = $22.50 / 450 hr = $0.05 per hr



Lubrication cost = $0.89 per hr + $1.06 per hr + $0.05 per hr = $2.00 per hr



Total operation costs = $17.88 per hr + $2.00 per hr + $10.11 per hr = $29.99 per hr



Total ownership costs = $21.51 per hr + $29.99 per hr = $51.50 per hr