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anticipated profits from a job. This is again due to the unpredictable nature of production on a construction project. The understanding and knowledge of the components of equipment costs are necessary for a good cost estimate. It is also important to note that for any decision made in the acquisition of equipment, all costs should be considered and accounted. A contractor does not pay for equipment but the equipment should pay for itself. Costs incurred in the procurement of equipment must be recovered somehow in the profit or saving in other areas. Equipment can be acquired through three methods: purchasing, renting, or leasing. (Calin, M 2003)
The initial cost is the total cost a contractor pays to purchase a piece of equipment and have it shipped to a jobsite or equipment yard. This initial cost is the basis for determining other costs related to ownership as well as operating costs. Generally,
initial cost is made up of:
Price at the factory or used equipment price,
Extra options and accessories,
Sales tax,
Freight, and
Assembly or setup charges.
The initial cost is very straightforward, whereas the following costs require more analysis and computation.

Depreciation in cost estimating has two aspects: a tax-deferred expense and the decline in market value of a piece of equipment due to age, wear, deterioration, and obsolescence.
There are three common methods for calculating depreciation expense for financial accounting purposes: straight-line, sum of years, and the Internal Revenue Service’s modified accelerated cost recovery system (MARCRS). Each involves the spreading of the amount to be depreciated over the recovery life of an asset in a systematic manner as prescribed by government tax laws. Each depreciation method selected produces different patterns of depreciation expense
per fiscal period. (Calin, M 2003)
Investment cost represents the cost of investment, or the typing up of a company’s capital in equipment. Investment cost is computed as the product of an interest rate multiplied by the value of the equipment. The value of equipment may be taken as the average value over the equipment’s life or, more realistically, as the depreciated value of the equipment at any given time. (Calin, M 2003)
Depreciation Expense per Hour of Operation = Original Cost/Total Operating Hour
Depreciation Expense per Hour of Operation = ＄312,500/18,000 Hours = ＄17.36 per operating hours
Assuming 2000 hours of operation per year:
Depreciation Expense = ＄17.36 per hr. ×2000 hrs = ＄34,722
Figure 5.1 Computation for depreciation charges based on operating hours.
(Calin, M 2003)

Equipment operating costs are the direct costs associated with equipment operations. Unlike ownership cost, an operating cost is not a fixed cost but a variable one, directly proportional to the amount of work performed or operating hours. An operating cost is incurred only when the equipment is actually being used. Equipment operating costs include fuel, grease, oil, electricity, tires, and repairs. Operating costs vary from the type of equipment used, the nature of the work, and the working conditions of the equipment. Mobilization and demobilization charges and operator wages are not included in equipment operating costs. Like the ownership cost, the cost of operating equipment should be calculated on the basis of the work hour.本论文由英语论文网提供整理，提供论文代写，英语论文代写，代写论文，代写英语论文，代写留学生论文，代写英文论文，留学生论文代写相关核心关键词搜索。