Lecture 19 - CVEN 349: Civil Engineering Project Management...

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1 CVEN 349: Civil Engineering Project Management LECTURE # 19 Fall 2009 Dr. Ivan Damnjanovic Brief History of Construction Equipment Steam Shovel Grader
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2 Tractor w/ Grader Tractor w/ Compaction Drums Haul Haul Wagons Wagons Modern Equipment
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3 Backhoe Loader www.cat.com Track Loader www.cat.com Wheeled Loader www.cat.com Wheeled Dozer www.cat.com
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4 Tracked Dozer www.cat.com Scraper www.cat.com Motor Grader www.cat.com Smooth Wheeled & Tamping Wheeled Roller www.cat.com
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5 Articulated Truck Dump Truck www.cat.com Excavator Backhoe www.cat.com Track Hoe Mobile & Tower Cranes Draglines & Clamshells
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6 Equipment Residential/Commercial Construction ± Rely on hand labor Relatively light Heavy/Industrial Construction ± Equipment-intensive Relatively light hand ± Relatively light equipment demands ± Equipment used tends to be medium-duty ± Relatively light hand labor demands ± Equipment used tends to be large, heavy- duty Why Do We Care About Equip. Costs? ± Equipment is expensive ± Equipment is pervasive ± Need to charge total equip. costs to owners through specific projects, or we’re decreasing our profit. ± The Problem : How do we know how much to charge for each piece of equip. on a job? Equipment Costs Total Equipment Cost Fixed/Ownership Costs Variable Costs Fixed Equipment Costs ± “Fixed cost” here means a cost that occurs whether or not equip. is being used -> may vary over time ± Examples: ± Depreciation ± Insurance ± Interest charges
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7 Variable/Operating Costs ± Occur due to the equip. being used ± Examples: ± Fuel ± Labor ± Tires ± Oil & grease The Basic Idea: Charge per Unit Production How We’ll Break This Down ± Ownership Costs 1. Depreciation 2. IIT (Interest, Insurance, Taxes) ± Operating Costs ± Overhead & Profit Ownership Costs: Depreciation ± Example: ± You pay $15,000 for a piece of equipment ± You use it for 5 years You sell it for $2 000 ± You sell it for $2,000 ± You’ve “lost” $13,000 in value – the equipment has “depreciated” (lost value) due to its use ± Depreciation represents a substantial, real cost to most projects (esp. heavy/industrial construction)
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8 Depreciation: Solutions 1. Tax breaks ± U.S. tax law allows tax deductions for depreciation provided proper rules are followed ± If your firm is in a high tax bracket, could save $0.34 for every dollar of depreciation deducted 2. Amortization ± Amortization = charge loss of equip. value to owner ± But how do we calc. this? Depreciation ² IRS tax rules must be followed – make sure you know what the current rules are ² We’ll cover 4 common methods that agree with the major tax code revision in 1986 ² These methods are still used ² If you’re asked to do this in practice, always check that you’re using firm-approved, legal depreciation methods!
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This note was uploaded on 05/28/2010 for the course CVEN 349 taught by Professor Damjanovic during the Fall '09 term at Texas A&M.

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Lecture 19 - CVEN 349: Civil Engineering Project Management...

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