Question

Your organisation has decided to purchase an item of equipment expected to work 1700 hours per year (average) for a 12-year working life.

(f) Assume now that you have purchased this equipment. What is the Total Annual payment required for operating the equipment? You have the following additional data:

• Maintenance costs are $60,000 in the first year

• Operator wages are $100,000 in the first year

• Storage, transport and other miscellaneous costs are $15,000 in the first year

• Money costs 8% per year Hint: Start by calculating the Capital Recovery Factor

(g) Maintenance, operator and miscellaneous costs are expected to increase at a flat rate of 4% per year over the life of the machine. Based on a Profit margin of 32%, create a table that calculates the hourly charge out rate, including profit, you would need for its hire during each year of the working life of the equipment.

(h) Also based on this hourly charge and expected operating hours, what is the expected annual income over the working life of the equipment?

Answer 1

Given:-

Maintainance cost=$60,000

Operator wages=$100,000

Storage,transport and other=$15000

Percantage cost=8%

Profit percentage=32%

Total charges of the organisation=60,000+100,000+15000=$175000

Percentage cost=175000*8/100=14000

Maintainance,operator and miscellaneous cost=175000*4/100=7000

Profit margin=14000+7000=21000

Percentage profit cost on total=21000*32/100=6,720

Total hours=1700 per year

12years=20400hrs

So,total charge of the equipment would be=20400*6720=13708800

That is the annual income of the equipment=$13,708,800