NSC Cost Estimation & Budgeting 3 — Questions and Answers
Question 1: A propane forklift costs $0.85 per hour to fuel. An electric model costs $0.22 per hour to charge. If both operate 2,000 hours per year, what is the annual fuel/energy savings with the electric model?
- $1,260 (Correct answer)
- $630
- $440
- $1,700
Correct answer: $1,260
($0.85 − $0.22) × 2,000 hours = $0.63 × 2,000 = $1,260 annual savings with the electric forklift.
Question 2: Which depreciation method results in the highest expense in the first year of forklift ownership?
- Straight-line depreciation
- Double declining balance (Correct answer)
- Units-of-production
- Sum-of-the-years'-digits
Correct answer: Double declining balance
Double declining balance applies twice the straight-line rate to the remaining book value, front-loading depreciation expense in the earliest years.
Question 3: In forklift fleet budgeting, what does the term 'lifecycle cost analysis' primarily evaluate?
- The cost of a single repair event
- Total costs from acquisition through disposal over the equipment's useful life (Correct answer)
- Operator certification renewal fees only
- Annual fuel consumption benchmarks
Correct answer: Total costs from acquisition through disposal over the equipment's useful life
Lifecycle cost analysis sums all costs — purchase, operation, maintenance, and disposal — across the entire service life to compare true equipment economics.
Question 4: A tire replacement for a sit-down counterbalanced forklift costs $420 per tire. If the unit requires all four tires replaced every 18 months, what is the annualized tire cost?
- $1,120 (Correct answer)
- $840
- $560
- $1,680
Correct answer: $1,120
4 tires × $420 = $1,680 per replacement; annualized over 18 months = $1,680 ÷ 1.5 years = $1,120/year.
Question 5: Which cost is classified as a variable operating cost rather than a fixed cost in a forklift budget?
- Monthly lease payment
- Equipment insurance premium
- Propane fuel consumed per shift (Correct answer)
- Operator base salary
Correct answer: Propane fuel consumed per shift
Propane consumption varies directly with operating hours, making it a variable cost, unlike fixed expenses such as lease payments or insurance premiums.
Question 6: What is the primary financial benefit of scheduling preventive maintenance (PM) on a defined interval rather than waiting for breakdowns?
- Eliminates the need for operator training
- Reduces unplanned downtime costs and extends equipment life (Correct answer)
- Guarantees OSHA compliance certification
- Lowers the initial purchase price
Correct answer: Reduces unplanned downtime costs and extends equipment life
Planned PM reduces costly emergency repairs and extended downtime, lowering overall maintenance spend and extending the forklift's productive lifespan.
Question 7: A fleet manager is comparing two forklifts: Model A has a purchase price of $35,000 with $4,500/year maintenance; Model B costs $28,000 with $6,200/year maintenance. After how many years does Model A become more economical?
- 3 years
- 4 years (Correct answer)
- 5 years
- Never — Model B stays cheaper
Correct answer: 4 years
The $7,000 price premium on Model A is recovered at $1,700/year savings ($6,200 − $4,500), taking exactly 4.1 years, so Model A breaks even after year 4.
NSC Cost Estimation & Budgeting 3
A propane forklift costs $0.85 per hour to fuel.
An electric model costs $0.22 per hour to charge.
If both operate 2,000 hours per year, what is the annual fuel/energy savings with the electric model?