Q1(b) Based on the following information given, calculate the “all- in”(Gross Rate) hourly cost for a

Komatsu hydraulic excavator. Adopt 15% as overhead and profit for both
standing and running charge.

Capital cost (purchase price) RM 400,000

Residual Value (resale/scrap value) RM 80,000
Interest on capital 4.3% compounded annually
Expected Life 10 years
Hours worked per annum 3000
Maintenance costs 6% of capital cost per annum
Insurance RM3,000 per annum
Road Tax RM 1000 per annum
Operator’s rate RM 16 per hour
Fuel 18 litres/ hour @RM 2.50/litre
Lubricants allow 10% of fuel costs

Solution:
Standing Charge
Capital Cost RM 400,000.00

Less Residual Value RM 80,000.00 -

Depreciation RM 320,000.00
Interest on capital, 4.3% compound over 10 years
= 400,000 [(1 + 0.043)¹º − 1] RM 209,400.88
Maintenance costs
= 400,000×0.06×10 RM 240,000.00
Insurance @RM3000/yearx10 yrs RM 30,000.00
Road Tax @RM1000/yearx10 yrs RM 10,000.00 +
Total for 10 years RM 809,400.88

Hourly rate of standing charge

= 809,400.88 ÷ (10×3000) RM 26.98/hour
Allow 15% for overhead and profit
= 26.98×0.15 RM 4.05/hour +
Total standing charge
Running Charge
Operator wages /hour RM 16.00
Fuel /hour
= 18×2.5 RM 45.00
Lubricants 10% of fuel costs RM 4.50
Hourly rate of running charge
= 16 + 45 + 4.5 RM 65.50/hour

Allow 15% for overhead and profit

= 65.50×0.15 RM 9.83/hour
Total running charge RM 75.33/hour

Total Cost
Standing charge RM 31.03/hour
Running charge RM 75.33/hour
Total hourly cost RM 106.36/hour