CEC Construction Equipment Costs & Ownership

Question 1

Which method of determining equipment ownership cost accounts for the purchase price, salvage value, and useful life of a machine?

Accepted Answer

Straight-line depreciation

Answer

Straight-line depreciation spreads the cost evenly over the useful life by subtracting salvage value from purchase price and dividing by the number of years, making it the most common method for estimating ownership cost.

Question 2

The hourly ownership cost of a piece of construction equipment is primarily based on which of the following?

Accepted Answer

Depreciation, interest, taxes, and insurance

Answer

Hourly ownership cost is calculated from depreciation, the cost of invested capital (interest), taxes, and insurance — collectively known as DITI costs.

Question 3

What does the term 'economic life' of construction equipment refer to?

Accepted Answer

The period during which it is most cost-effective to own and operate the machine

Answer

Economic life is the period during which owning and operating the equipment is more cost-effective than replacing it; beyond this point, rising repair costs outweigh the value of continued use.

Question 4

An estimator calculates the 'operating cost' of a bulldozer. Which of the following is included in operating cost but NOT in ownership cost?

Accepted Answer

Fuel and lubricants

Answer

Fuel and lubricants are variable operating costs that only occur when the machine is running, whereas insurance, depreciation, and interest are fixed ownership costs incurred regardless of machine use.

Question 5

When renting equipment for a short-duration task, which cost is typically avoided compared to owning the same piece of equipment?

Accepted Answer

Ownership depreciation and capital cost

Answer

Renting eliminates the ownership costs of depreciation and capital investment, making it financially advantageous for short-term or infrequent equipment needs.

(CEC) Construction Estimator Certification Practice Test

(CEC) Construction Estimator Certification Practice Test

CEC Construction Equipment Costs & Ownership