You have been asked to give an economical assessment based on ownership cost and operating cost ($/hr) of a loader with the purchase price of $350000. Using straight line depreciation method, the machine is expected to be used for 5 years and is expected to be sold for $60000 at the end of the 5th year. A set of tires for this loader, which should give 3000 hrs of service, cost $36000. The annual cost of repairs equals 75% of the straight-line machine depreciation. Tire repair is 16% of tire depreciation. The loader is expected to work 1500 hr/yr. The oil consumption of the loader is 0.237gal/hr and fuel consumption of the loader is 7.215gal/hr; oil is $3.00/gal and fuel cost $1.15/gal. The cost of other lubricants and filters is $0.65/hr. The annual interest rate is 7%. a) What is the cost per hour of owning the loader? $ /hr (keep 2 decimal places) b) What is the hourly repair cost of the loader? $ /hr (keep 2 decimal places) c) What is the hourly cost of the tire repair and replacement(s)? (disregard the salvage values of the tires) $ /hr (keep 2 decimal places) d) What is the total hourly cost of operating this loader (calculate operation cost only)? $ /hr (keep 2 decimal places)

You have been asked to give an economical assessment based on ownership cost and operating cost ($/hr) of a loader with the purchase price of $350000. Using straight line depreciation method, the machine is expected to be used for 5 years and is expected to be sold for $60000 at the end of the 5th year. A set of tires for this loader, which should give 3000 hrs of service, cost $36000. The annual cost of repairs equals 75% of the straight-line machine depreciation. Tire repair is 16% of tire depreciation. The loader is expected to work 1500 hr/yr. The oil consumption of the loader is 0.237gal/hr and fuel consumption of the loader is 7.215gal/hr; oil is $3.00/gal and fuel cost $1.15/gal. The cost of other lubricants and filters is $0.65/hr. The annual interest rate is 7%. a) What is the cost per hour of owning the loader? $ /hr (keep 2 decimal places) b) What is the hourly repair cost of the loader? $ /hr (keep 2 decimal places) c) What is the hourly cost of the tire repair and replacement(s)? (disregard the salvage values of the tires) $ /hr (keep 2 decimal places) d) What is the total hourly cost of operating this loader (calculate operation cost only)? $ /hr (keep 2 decimal places)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

You have been asked to give an economical assessment based on ownership cost and operating cost ($/hr) of a loader
with the purchase price of $350000. Using straight line depreciation method, the machine is expected to be used for 5
years and is expected to be sold for $60000 at the end of the 5th year.
A set of tires for this loader, which should give 3000 hrs of service, cost $36000. The annual cost of repairs equals 75% of
the straight-line machine depreciation. Tire repair is 16% of tire depreciation. The loader is expected to work 1500 hr/yr. The
oil consumption of the loader is 0.237gal/hr and fuel consumption of the loader is 7.215gal/hr; oil is $3.00/gal and fuel
cost $1.15/gal. The cost of other lubricants and filters is $0.65/hr. The annual interest rate is 7%.
a) What is the cost per hour of owning the loader?
$
/hr (keep 2 decimal places)
b) What is the hourly repair cost of the loader?
$
/hr (keep 2 decimal places)
c) What is the hourly cost of the tire repair and replacement(s)? (disregard the salvage values of the tires)
$
/hr (keep 2 decimal places)
d) What is the total hourly cost of operating this loader (calculate operation cost only)?
$
/hr (keep 2 decimal places)

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Step 3: Compute Hourly Repair Cost:

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Step 4: Compute Hourly Cost for Repair & Replacements

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Step 5: Compute Total Hourly Cost for Operating this Loader

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