You have just bought a used track-type tractor to add to yourproduction fleet. The initial capitalized value of the tractoris $110,000. The estimated service life remaining on thetractor is 10,000 hours and the anticipated operating conditionsacross the remainder of its life are normal. The salvagevalue of the tractor is $12,000. The tractor was purchasedon July 1, 1997. a. What amount of depreciation will you claim for eachcalendar year between 2007 and 2010?b. What percent of the total depreciable amount is taken inthe first year?c. The IIT components of ownership cost based on averageannual value are:Tax: 3%Insurance: 2%Interest: 8%What cost per hour of operation would you charge tocover IIT?d. If the total average operating cost for the tractor is$23.50 per hour and the amount of overhead cost proratedto this tractor for the year is $4,000, what would beyour total hourly cost for the operation of the tractor(during the first year of its service life)?
You have just bought a used track-type tractor to add to your
production fleet. The initial capitalized value of the tractor
is $110,000. The estimated service life remaining on the
tractor is 10,000 hours and the anticipated operating conditions
across the remainder of its life are normal. The salvage
value of the tractor is $12,000. The tractor was purchased
on July 1, 1997.
a. What amount of depreciation will you claim for each
calendar year between 2007 and 2010?
b. What percent of the total depreciable amount is taken in
the first year?
c. The IIT components of ownership cost based on average
annual value are:
Tax: 3%
Insurance: 2%
Interest: 8%
What cost per hour of operation would you charge to
cover IIT?
d. If the total average operating cost for the tractor is
$23.50 per hour and the amount of overhead cost prorated
to this tractor for the year is $4,000, what would be
your total hourly cost for the operation of the tractor
(during the first year of its service life)?
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