Intermediate Equipment Handbook
Intech Associates
1.3.6 Utilisation
This is probably the most important issue to consider in owning and costing
equipment. The cost models described in Section 1.4 demonstrate how the cost
of equipment varies with equipment life in years, but more particularly with
annual utilisation. Figure 1.6 illustrates this relationship5 (the actual figures may
not be applicable to a particular developing country situation as local cost factor
vary significantly, however the relative values are indicative).
Basically, at high utilisation the equipment investment is being paid back more
quickly with work or charges, thus lowering finance costs per hour, spreading the
investment costs over a greater number of working hours (within the parameters
of economic life) and preventing obsolescence from prematurely devaluing the
asset.
5 Derived from MART Working Paper No 7 - Agricultural Tractors in Roadworks, and the Handbook
Cost Model
October 2012
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