|
|
Article: How to find the sweet spot: the economic ownership period keeps costs within acceptable boundaries.(Equipment Executive)
- Article from:
- Construction Equipment
- Article date:
- July 1, 2004
- Author:
CopyrightCOPYRIGHT 2004 Reed Business Information, Inc. (US). This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
|
How much does it cost?" and "How long do I keep it?" are two questions that cannot be answered in isolation. If you keep a machine for a short period, then high depreciation dominates calculation of owning costs and produces a high hourly rate. If you keep the machine too long, then high repair costs result in high operating costs and cause the average hourly owning-and-operating cost to increase.
[ILLUSTRATION OMITTED]
There is an "economic ownership period" or "sweet spot" when the sum of owning and operating costs is minimized. You have kept the machine long enough to reduce owning costs but not long enough to experience unnecessarily high repair ...