ECONOMICAL ASPECTS

OF
HANDLING EQUIPMENT

Major Repair Cost & Break-Even Point

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 Major Repair Cost
 While minor or field repairs are carried out during the
day to day working of the equipment, the major
repairs are carried out after the substantial use of the
equipment.

 Major repairs and overhauls are the replacement of

major parts of the equipment because of the excessive
wear through a long period of use.

 Since these repairs required a heavy amount of

expenditure, they are met from the major repair fund.

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 The major repair cost is spread out during the entire life
span of the equipment and a flat rate is levied per
working hour in order to have a uniform rate.

 The, amount thus collected in the pool is known as

Major repair fund, and major repairs and overhauls are
carried out from this pool.

 Usual practice is to consider this major repair cost as a

percentage of straight line depreciation cost and is
generally taken as 80 to 200% of the cost of
depreciation.
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 OPERATING COSTS

 Cost of fuel
 Cost of Lubricants
 Servicing and Maintenance Cost
 Labor Cost
 Cost of Field Repairs
 Overheads

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 DETERMINATION OF OWNING AND
OPERATING COSTS
I. Ownership Charges :
 Depreciation
 Interest, Insurance, Taxes and Storage

II. Operating Charges :

 Fuel Charges
 Lubricants and filters charges
 Repair Charges
 Labor cost
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 BREAK-EVEN-POINT
 Break-even point means the level of output or sales at
which no profit or loss is achieved.
 It indicates the position at which marginal profit or
contribution is just sufficient to cover fixed
overheads.
 In other words, a business is said to be break-even
when the income equals its expenditure.
 When production exceeds the 'break-even point' the
business makes a profit and when it is below the
'break-even point', the business makes the loss.
 The break-even-point of any two variable situations,
is the point or the value at which they become equal
as the result of a common variable.
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 Graphical Method
 Although the break-even-point may be
calculated mathematically, but it is usually
presented graphically because it enables
manager to see more clearly, the break-even-
point and the possibilities for profits and
losses.
 By using these charts one can predict probable
profits at various levels of output.

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BREAK-EVEN CHART
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BREAK-EVEN CHART 9
 BREAK EVEN CHART

Break even point Income

loss profit

Total costs

Fixed
Costs

Levels of Output
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 A break-even-chart is used to determine break-
even point and amount of loss or profit under
varying conditions of output and costs.

 Income and expenditure is represented on

vertical axis, while output (either in quantity or
in percentage capacity) is represented on
horizontal axis.

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