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

Book value is the accounting value calculated as original cost minus all depreciation recorded to date; it may differ significantly from actual market value.

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

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.

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

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.

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

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.

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

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.

(CPE) Certified Professional Estimator Practice Test

(CPE) Certified Professional Estimator Practice Test

CPE Construction Equipment Costs & Management 3