Calculating Depreciation Cost in RILSIM

Note: The information that follows has been extracted from the Depreciation Cost topic in RILSIM's Help file. You can find the complete topic by looking in the Help index under depreciation cost, feuille de calcul du coût de l'amortissement, custo depreciação (planilha), or costo depreciación in the English, French, Portuguese, and Spanish versions respectively. If you cannot find these topics in RILSIM's Help index, you do not have the latest version of RILSIM. Click here to download the installation module for the latest version.

Depreciation cost represents the cost of ownership for an equipment item. In RILSIM, depreciation may be expressed either per operating hour (for time-based costs) or per production unit (for piece rates). Although there are many ways of calculating depreciation, the most common is “straight line” depreciation. Below are two examples, one for hourly costs and the other for a piece rate based on log production measured in cubic meters.

Data for Calculation Examples 1 and 2 Below
Item	Value	Units	Notes
Equipment item	Rubber-Tired Skidder		This is the item of equipment for which the depreciation cost is to be calculated.
Currency	US Dollars	$	Any currency could be used.
Purchase price	250,000	$	Includes all taxes, setup and delivery costs, and similar charges related to the purchase.
Userful life	10,000	hr	Estimated useful life is 5 years at 2,000 operating hours per year.
Resale credit	37,500	$	Estimated here as 15% of the purchase price; often referred to as “salvage value”.
Production rate	20	m3/hr	Average volume of logs transported per operating hour by the skidder under normal conditions.
Tire cost	20,000	$	This is a major cost item that wears out more quickly than the skidder itself. The cost accounting for tires is thus handled separately from depreciation cost for the skidder. The amount shown here is the cost of the set of four new tires included with the skidder when it was purchased.

1. Calculation of hourly depreciation cost ($/hr)
Purchase price	$250,000
– Tire cost	– $20,000
– Resale credit	– $37,500
= Depreciable value	= $192,500
Depreciation cost =	Depreciable value / Useful life, hr
=	$192,500 / 10,000 hr
=	$19.25 / hr

2. Calculation of piece-rate depreciation cost ($/m3)
Depreciation cost =	Depreciable value / Useful life, m3
=	$192,500 / (10,000 hr x 20 m3/hr)
=	$0.9625 / m3

Calculating Depreciation Cost in RILSIM

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