Question

A project requires a contractor to excavate 28,000 bank CY dry earth, haul it away to a borrow area located 3 miles away. The contractor has 4 weeks to complete the work. The contractor doing the work has decided to mobilize scrapers with a capacity of 20 loose CY. Each Scraper has a typical cycle time of 20 minutes due to the rough terrain at the site. The contractor can purchase one scraper but will have to rent additional scrapers if necessary. The cost data for a CAT 621 Scraper is as follows: A new CAT 621G costs $450,000 (without tires). The contractor plans to use it for five years (average 2000 hours per year) and sell it for $190,000. The scraper tires cost $4,250/tire (scraper has 4 tires) and will likely last 6000 hours. The scraper consumes 10 gallons of fuel per hour. Diesel cost can be estimated at $3.0/gal. The annual maintenance cost for the scraper can be estimated at $18,000. Scraper operator costs $58.00 /hour including overheads. The rate of interest can be assumed to be 6.5%. The rental agency is willing to rent a 621G for $6,000 per week or $ 18,000 per month. The contractor will have to provide fuel and operator. The mobilization and demobilization cost for each scraper is $2,500. Based on this information, analyze the earthwork operations. Make recommendations:

1. How many scrapers should the contractor rent?

2. Estimate the cost in $$/bank CY

(Please show all work clearly and neatly)

Answer 1

1. Scrapers number -

Given information are as follows:

Total bank CY dry earth - 28,000

Number of days for excavation - 4 weeks or 28 days.

Therefore, 1,000 bank CY to be removed per day.

Scrapers capacity per round - 20 bank CY

Scraper turnaround time - 20 mins

Therefore, per hour 1 scraper can excavate 20 x 3 = 60 CY. (Assuming it works at 100% capacity everytime)

Therefore, per day 1 scraper can excavate 60 x 24 = 1,440 CY

Hence, since 1 scraper can excavate more than the budgeted excavation per day, the contractor can either or lease just 1 scraper to do the job.

2. Cost per $$ / Bank CY -

Particulars	Bought	Rented
Acquisition cost	450,000	-
Rent per month (to be taken for the month as the cost for the monthly rent is less than the weekly rent)	-	18000
Residual Value	-190,000	-
Tyre Cost (4,250 x 4) x 2 as the total number of hours for 5 years will be 10,000 hours	34,000	-
Diesel Cost (Bought 10 x 3 x 10000) (Rent 10 x 3 x 24 x 28)	300,000	20,160
Annual Maintenance cost (18,000 x 5)	90,000	-
Overhead cost (Bought 58 x 10,000) (Rent 58 x 28 x 24)	580,000	38,976
Mobilization expenses	2,500	2,500
Interest expenses (450,000 x 6.5% x 5)	146,250	-
Total Expenses	1,412,750	79,636
Total Bank CY (Bought - 60 x 10,000)	600,000	28,000
Total cost in $$ / Bank CY	2.355	2.844

Hence, the company should purchase 1 scraper for the project.