A project requires a bulldozer for site preparation. The equipment can be rented for $650 per day or the contractor can use their owned equipment. The owned equipment has daily costs of $180 for fuel, $45 for maintenance, and $95 for operator. What is the daily savings of using owned equipment?
Correct Answer
B) $330
Owned equipment daily cost: $180 + $45 + $95 = $320. Rental cost: $650. Daily savings: $650 - $320 = $330. This calculation assumes the owned equipment is already available and doesn't include depreciation or opportunity costs.
Why This Is the Correct Answer
Option B is correct because it properly calculates the total daily cost of owned equipment by adding all operating expenses ($180 fuel + $45 maintenance + $95 operator = $320), then subtracts this from the rental cost ($650 - $320 = $330). This represents the actual daily savings achieved by using owned equipment instead of renting. The calculation focuses on direct operating costs and excludes ownership costs like depreciation since the equipment is already owned.
Why the Other Options Are Wrong
Option A: $230
Option A ($230) appears to have excluded one of the cost components, possibly the fuel cost, resulting in an incomplete calculation of the owned equipment's daily operating expenses.
Option C: $405
Option C ($405) likely calculated only the rental cost minus fuel and maintenance ($650 - $180 - $45 = $425) but made an error or excluded the operator cost incorrectly.
Option D: $470
Option D ($470) appears to have subtracted only the fuel cost from the rental cost ($650 - $180 = $470), completely ignoring the maintenance and operator costs for owned equipment.
Memory Technique
Use 'FMO' (Fuel, Maintenance, Operator) to remember the three main daily operating costs for owned equipment, then subtract total from rental to find savings.
Reference Hint
Construction cost estimating chapters covering equipment costs and rent vs. buy analysis, typically found in project management or cost control sections
More Contract Admin Questions
A project experiences a 30-day delay due to unusually severe weather. The contract includes a liquidated damages clause of $1,000 per day for delays. If the weather delay is excusable but not compensable, what liquidated damages apply?
A commercial project requires a total of 12 inspections. The building department charges $85 per inspection for the first 5 inspections, $65 for inspections 6-10, and $45 for any additional inspections. What is the total inspection fee?
What document must be posted at the job site before a Certificate of Occupancy can be issued for a commercial building?
A mixed-use development requires a variance for reduced setbacks. The property is located within 500 feet of a hospital. What additional consideration must be addressed?
A LEED project requires tracking of regional materials. Materials are considered regional if they are extracted, harvested, or recovered, as well as manufactured within what distance of the project site?
People Also Study
Business & Financial Management
120 questions · 70% to pass
Project Management
60 questions · 70% to pass
Previous Question
During a final inspection for a Certificate of Occupancy, the building inspector finds that the exit signs are not illuminated. This is considered what type of violation?
Next Question
A contractor needs to estimate the cost of a backup generator for a 30-day rental period. The generator costs $150,000 new, has a 10-year useful life, and the rental rate is $400 per day. What is the ownership cost per day assuming straight-line depreciation?