In: Accounting
Operating factor 50%
Purchase price $175,000 (including tires)
Freight charges $1,500
Estimated salvage value $17,500
Useful life 7 years
Hours used per year 1,800
Maintenance & repairs 125% of annual depreciation
Equipment overhead rate 11% of average annual investment
Diesel price $1.45 per gallon
Total hourly cost =
Group of answer choices
$34.32
$54.32
$40.38
$44.23
Group of answer choices
84 CYD
105 CYD
2125 CFT
1035 CFT
Step 1
Average Annual Investment
Purchase price175000
Delivery cost=1500
Salavage Value =17500
Average Annual Investment= Purshase Price + Delivery Cost+ Salavage Value/2
175000+1500+17500/2 = 97000
Spet 2
Fuel Consumption
(Motor horse power)(Fuel Consumptio Rate)(Operating Factor)/100
Motor horse powe=190hp
Fuel Consumptio Rate = 0.06
Operating Factor= 50
(190)(0.06)(50)/100 = 5.7gal/hr
Step 3
Depreciation
PurchasePrice+Delivery Cost-salvage Value/usefull Life
Purchase price=175000
Delivery cost=1500
Salavage Value =17500
usefull Life = 7 years
175000+1500-17500/7 = 22714/year
Step 3
Maintenance and Rapairs
(Rapair Rate Estimate)(Deperaciation Cost)
Rapair Rate Estimate =125%
Deperaciation Cost = 22714/year
=(1.25)(22714)
=28392.5
Step 4
Equpment overhead
=(Overhead rate)(Average cost investment)
=(11%)(Average cost investment)
=(0.11)(97000)
=10670
Step 5
Annual Cost
=Depreciation+Maint.and Repairs+overhead
=22714+28392.5+10670
=61,776.5
Hourly Vehicle Cost
=Annua Vehicale Cost/Asset Jsage Time per year
= 61776.5/1800
=34.32/hr
Step 6
Fuel Cost
=(Fuel Consumption rate)(Fuel Cost)
=(5.7 gal/hr)(1.45 per gal)
=8.26/hr