Question

A Dozer cost Ph 2,115,000 to purchase. Fuel, oil grease, and minor maintenance are estimated to cost Ph580 per operating hour. A set of tires cost Ph150,000 to replace, and their estimated life is 2,800 use hours. A Ph282,000 major repair will probably be required after 4,200hr of use. The equipment is expected to last for 8,400 hr, after which it will be sold at a price equal to 15% of the original purchase price. A final set of new tires will not be purchased before the sale. How much should the owner of the Dozer charge per hour of use, if it is expected that the machine will operate 1,400 hr per year? The company's capital rate is 8%.

Answer 1

To calculate the charge per hour for the Dozer, we need to determine the total costs associated with operating the machine for 1,400 hours per year. The owner of the Dozer should charge Ph979.46 per hour of use.

Step-by-step explanation:

To calculate the charge per hour for the Dozer, we need to determine the total costs associated with operating the machine for 1,400 hours per year.

First, we calculate the fuel, oil, grease, and minor maintenance cost:

(Ph580/operating hour) * 1,400 hours = Ph812,000

Next, we calculate the expected cost for replacing tires:

(Ph150,000/tire) * (2,800 use hours / 4,200 hours) = Ph100,000

Then, we determine the expected cost for major repair:

(Ph282,000/major repair) * (4,200 hours / 8,400 hours) = Ph141,000

Finally, we calculate the salvage value of the Dozer:

15% * Ph2,115,000 = Ph317,250

Adding up all the costs:

Ph812,000 + Ph100,000 + Ph141,000 + Ph317,250 = Ph1,370,250

Finally, we divide the total costs by the total operating hours per year:

Ph1,370,250 / 1,400 hours = Ph979.46

Therefore, the owner of the Dozer should charge Ph979.46 per hour of use.

Answer 2

To determine the charge per hour for the Dozer, calculate the total operating cost per hour and divide it by the expected operating hours per year. The charge per hour is Ph 868.39.

Step-by-step explanation:

To determine how much the owner of the Dozer should charge per hour of use, we need to calculate the total operating cost per hour.

Calculating the total operating cost per hour:

Fuel, oil, grease, and minor maintenance cost: Ph 580

Cost of tires per hour: Ph 150,000 / 2,800 = Ph 53.57

Cost of major repair per hour: Ph 282,000 / 4,200 = Ph 67.14

Total operating cost per hour = Ph 580 + Ph 53.57 + Ph 67.14 = Ph 700.71

Calculating the charge per hour:

Total operating cost per year = Ph 700.71 * 1,400 hours = Ph 980,994

Depreciation per year = (Ph 2,115,000 - (0.15 * Ph 2,115,000)) / 8,400 = Ph 234,750

Total cost per year = Total operating cost per year + Depreciation per year = Ph 980,994 + Ph 234,750 = Ph 1,215,744

Charge per hour = Total cost per year / 1,400 hours = Ph 1,215,744 / 1,400 = Ph 868.39