Construction Equipment Costs & Management Flashcards
7 cards from real CPE practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Construction Equipment Costs & Management flashcards as text
The 'book value' of a piece of construction equipment at any point in its service life equals:
Answer: Original purchase cost minus accumulated depreciation to date
Book value is the accounting value calculated as original cost minus all depreciation recorded to date; it may differ significantly from actual market value.
Which depreciation method allocates larger deductions in the early years of equipment ownership and smaller deductions in later years?
Answer: Double declining balance method
The double declining balance method applies double the straight-line rate to the remaining book value each year, front-loading deductions to accelerate tax benefit recovery.
In construction estimating, mobilization and demobilization costs for major equipment are BEST treated as:
Answer: A separate line item in the project estimate or bid
Mobilization and demobilization costs are project-specific, lump-sum items that vary by distance and equipment type and are best captured as a distinct bid line to ensure full recovery.
Salvage value is important in equipment depreciation calculations because:
Answer: It represents the estimated residual value that reduces the total depreciable base
Salvage (residual) value is subtracted from original cost to establish the depreciable base; higher salvage values reduce annual depreciation charges over the equipment's useful life.
'Economic obsolescence' as applied to construction equipment refers to loss in value caused by:
Answer: Superior new equipment technology making existing equipment less competitive or productive
Economic obsolescence is an external form of depreciation driven by technological advances or market changes that reduce the competitive value of existing equipment independent of its physical condition.
Under the Modified Accelerated Cost Recovery System (MACRS), most heavy construction equipment such as cranes, bulldozers, and excavators is classified as:
Answer: 7-year property
Most heavy construction equipment falls under the 7-year MACRS property class (Asset Class 15.0), allowing accelerated depreciation deductions over that recovery period.
When an equipment rental rate is quoted as an 'all-in' rate, this typically means the rate includes:
Answer: Equipment cost, fuel, preventive maintenance, and operator wages combined
An all-in rental rate bundles all cost components—equipment, fuel, maintenance, and operator—into a single hourly or daily rate, simplifying cost comparison and billing.