EQUIPMENT COST
, Objective
To calculate the right
numbers and
combinations of
equipment to an optimal
Overall cost of production
through appropriate
economical means.
, EQUIPMENT COSTS
• Ownership costs:
– Investment
– Depreciation
• Operating costs:
– Maintenance
– Repairs
– Lubrication
– Fuel
– Labor
• Ownership costs accrue whether or not
equipment is actually used. For costly equipment
need to maximize utilization.
, EQUIPMENT COSTS
• Investment costs:
– Interest on money invested
– Taxes
– Insurance
– Storage
• Need to charge interest as opportunity of
earning interest by investing is lost.
• Some owners charge a fixed rate of interest
against the full purchase cost of equipment
each year owned.
– Yields higher interest costs.
, Objective
To calculate the right
numbers and
combinations of
equipment to an optimal
Overall cost of production
through appropriate
economical means.
, EQUIPMENT COSTS
• Ownership costs:
– Investment
– Depreciation
• Operating costs:
– Maintenance
– Repairs
– Lubrication
– Fuel
– Labor
• Ownership costs accrue whether or not
equipment is actually used. For costly equipment
need to maximize utilization.
, EQUIPMENT COSTS
• Investment costs:
– Interest on money invested
– Taxes
– Insurance
– Storage
• Need to charge interest as opportunity of
earning interest by investing is lost.
• Some owners charge a fixed rate of interest
against the full purchase cost of equipment
each year owned.
– Yields higher interest costs.
