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
A) $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 B: $230
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.
Option C: $405
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.
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
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