CPE Construction Equipment Costs & Management 3

Question 1

The 'book value' of a piece of construction equipment at any point in its service life equals:

Accepted Answer

Original purchase cost minus accumulated depreciation to date

Answer

Current fair market resale value minus anticipated repair costs

Answer

Replacement cost of equivalent new equipment adjusted for inflation

Answer

Purchase price plus capitalized major overhaul expenditures

Question 2

Which depreciation method allocates larger deductions in the early years of equipment ownership and smaller deductions in later years?

Accepted Answer

Double declining balance method

Answer

Straight-line method

Answer

Units of production method

Answer

Sum-of-years method applied retroactively

Question 3

In construction estimating, mobilization and demobilization costs for major equipment are BEST treated as:

Accepted Answer

A separate line item in the project estimate or bid

Answer

Included within the equipment's standard hourly operating rate

Answer

An overhead expense allocated proportionally to all direct costs

Answer

A contingency reserve item in case of project delay

Question 4

Salvage value is important in equipment depreciation calculations because:

Accepted Answer

It represents the estimated residual value that reduces the total depreciable base

Answer

It determines the maximum replacement cost eligible for insurance reimbursement

Answer

It establishes the floor price for equipment disposal at public auction

Answer

It equals the equipment book value at the time the unit is sold

Question 5

'Economic obsolescence' as applied to construction equipment refers to loss in value caused by:

Accepted Answer

Superior new equipment technology making existing equipment less competitive or productive

Answer

Physical deterioration from wear, corrosion, and fatigue

Answer

Environmental regulations mandating replacement before end of mechanical life

Answer

Manufacturer cessation of replacement parts production

Question 6

Under the Modified Accelerated Cost Recovery System (MACRS), most heavy construction equipment such as cranes, bulldozers, and excavators is classified as:

Accepted Answer

7-year property

Answer

3-year property

Answer

5-year property

Answer

15-year property

Question 7

When an equipment rental rate is quoted as an 'all-in' rate, this typically means the rate includes:

Accepted Answer

Equipment cost, fuel, preventive maintenance, and operator wages combined

Answer

Equipment cost only, with fuel and operator billed separately

Answer

Equipment ownership cost with operating costs excluded

Answer

Only the equipment lease payment without insurance or taxes