Question

Calculate the expected hourly owning and operating costs for 2nd year for a wheel loader with the following information. Use the double declining balance method of depreciation.

Delivered price (initial cost) $450,000
Tire cost $20,000
Estimated life 6 years
Salvage value $60,000
Investment cost for the 2nd year 15 % of the delivered price
Tax, insurance and storage for 2nd year 15% of the book value of 2nd year
Operating conditions: Severe
Rated power: 450 hp
Fuel price: $2.5/gallon
Operator’s wages: $18/hour
Hours operated 5 days a week and 8 hours per day
Equipment remains idle (not working) for 42 days during the year; 1 year=52 weeks=365 days
Cost of special items $15/hour

Answer 1