Question

(50 points) Calculate the hourly ownership and operating cost of a wheel-type scraper that has the following characteristics:

Total initial cost = $550,000 (including tires)

Useful life of the scraper = 6 years

Salvage value of the scraper = $75,000

Hours scraper used/year = 1,500 hours

Cost of tires = $20,000

Useful life of tires = 4,500 hours

Annual tire repair cost = 15% of tire depreciation (assume straight line depreciation)

Annual interest, insurance, and tax costs = 12% ofAverage Annual Value

Annual cost for fuel, oil, grease and other oils = 4% of Average Annual Value

Operating Conditions = Average

Interest rate (discount factor) = 5%

Ownership Cost	$/hour
Cost due to purchase (Use EUAC Analysis)
Interest, insurance, and tax (IIT cost)
Operating Cost	$/hour
Cost of tires (Use EUAC Analysis)
Tire repair cost
Fuel, oil, grease (FOG), and other oils
Scraper repair cost

Answer 1

Calculation the hourly ownership and operating cost of a wheel-type scraper.

Sr.No.	Purticulers	Cost	Hours	Cost per hour
A	Ownership cost
i	Cost due to purchase (Used EUAC Analysis)	$93,347	1500	$64.90
ii	Interest, insurance, and tax (IIT cost) (12% ofAverage Annual Value)	$5,841 ($93,347*12%/2)	1500	$3.90
	Total			$68.80
B	Operating cost.
i	Cost of tires (Use EUAC Analysis)	$3,940 ($20,000/5.0757)	1500	$2.63
ii	Tire repair cost (15% of tire depreciation)	=6666.67*15%=1000 calculation of depreciation =$20,000/4500hrs*1500hrs =$6666.67	1500	.$67
iii	Fuel, oil, grease (FOG), and other oils	$1867 =93347*4%/2	1500	$1.25
	Total			$4.55

Calculation of Equivalent annual cost of scarper

Purticulers	Value	Discounting factor@5%	Net value
Cost Of scraper	$5,50,000	1	$5,50,000
Less:Salvage value	$75,000	.7462	$55,965
net cost			$4,94,035
Discounting facor for six years (1/1.05) for six years			5.0757
Equivalent annual value			$97,347