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What is unit cost associated with using the tractor

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Reference no: EM133144653

Question - You are awarded a project for earthmoving related to a parking lot. You plan to use crawler tractor with the following information (Now is the third year since you purchased the tractor): The crawler tractor is used about 1,500 hours per year. It costs $150,000 new and has a useful life of 15,000 hours. Estimated salvage value after 15,000 hours of use is $25,000. Interest on investment is 7%, Insurance is 2%, Taxes 3.5%, and storage 0.5%. If using sum-of-years (SOY) depreciation method:

a. What is the hourly ownership cost of the tractor in the third year?

b. Using straight line depreciation method, what is the estimated hourly maintenance and repair cost if the tractor is used under average condition?

c. The tractor is powered by a 200-horsepower diesel engine. What is the estimated hourly fuel cost if the tractor is used under average condition and diesel fuel costs $2.5/gal?

d. What is the estimated hourly cost for filter, oil, and grease if the tractor is used in average condition?

e. You have estimated the productivity of the tractor to be 92.5 LCY/hour. What is unit cost ($/LCY) associated with using the tractor if operator's hourly wage is $25/hour?

Reference no: EM133144653

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