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Define ownership cost

Total cost of ownership (TCO) is a financial estimate intended to help buyers and owners
determine the direct and indirect costs of a product or system. It is a management
accountingconcept that can be used in full cost accounting or even ecological economics where
it includes social costs.
For manufacturing, as TCO is typically compared with doing business overseas, it goes beyond
the initial manufacturing cycle time and cost to make parts. TCO includes a variety of cost of
doing business items, for example, ship and re-ship, and opportunity costs, while it also
considers incentives developed for an alternative approach. Incentives and other variables
include tax credits, common language, expedited delivery, and customer-oriented supplier visits


The purchase price of an asset plus the costs of operation. When choosing
among alternatives in a purchasing decision, buyers should look not just at an
item's short-term price, which is its purchase price, but also at its long-term
price, which is its total cost of ownership. The item with the lower total cost of
ownership will be the better value in the long run.


For example, the total cost of ownership of a car is not just the purchase price,
but also the expenses incurred through its use, such as repairs, insurance and
fuel. A used car that appears to be a great bargain might actually have a total
cost of ownership that is higher than that of a new car, if the used car requires
numerous repairs while the new car has a three-year warranty.
Total Cost of Ownership (TCO) is an analysis meant to uncover all the lifetime costs that follow from
owning certain kinds of assets. Ownership brings purchase costs, of course, but ownership can also
bring costs for installing, deploying, operating, upgrading, and maintaining the same assets.
TCO is sometimes called life cycle cost analysis. For many kinds of acquisitions, TCO analysis finds
a very large difference between purchase price and total life cycle costs, especially when viewed
across a long ownership period.
Those who purchase or manage computing systems have had a high interest in TCO since the 1980s,
when the potentially large difference between IT systems prices and systems costs started drawing
the attention of the IT consulting community and IT vendor marketers. Competitors of IBM, for
instance, used TCO analysis to argue that an IBM computing environment was an overly expensive

ownership proposition. The five year cost of ownership for major hardware and software systems
from any vendorcan be five to ten times the hardware and software purchase price.
Today, TCO analysis is used to support acquisition and planning decisions for a wide range of assets
that bring significant maintenance or operating costs across ownership life. Total cost of ownership
(TCO) analysis is center stage when management is faced with acquisition decisions for computing
systems, vehicles, buildings, laboratory equipment, medical equipment, factory machines, and private
aircraft, for instance. Today, TCO analysis for these kinds of assets is in fact a central concern in the

Budgeting and planning.

Asset life cycle management.

Prioritizing capital acquisition proposals.

Vendor selection.

Lease vs. buy decisions.

What are the various cash flow affecting ownership

costBusiness ownership costs
There are five ownership costs that every company incurs, namely: depreciation costs,
interest costs, repair costs taxes, and insurance costs. They are commonly referred to
as the "DIRTI 5".
a) Depreciation
This is a procedure for allocating the used up value of durable assets over the period
they are owned by the business or until they are salvaged. By depreciating an asset, an
allowance is made for the deterioration in the asset's value as a result of use (wear and
tear), age and obsolescence. Generally, property is depreciable if it is used in business
or to earn income;, wears out, decays, gets used up or becomes obsolete, and has a
determinable useful life of more than one year. The proportion of the original cost to be
depreciated in any one year is largely a matter of judgement and financial management.
Normally, the depreciation allowance taken in any given year should reflect the actual
decline in value of the asset - whether it is designed to influence income taxes or the
undepreciated value of an asset reflecting the resale value of the asset.
There are four main and acceptable methods of calculating depreciation, namely:
the accelerated cost recovery system (ACRS) method
the straight line method
the declining balance method
the sum of the years-digits method.
The accelerated cost recovery system method is a relatively new method of
calculating depreciation for tangible property. It came into use effectively in 1981. As a
method ACRS generally gives much faster write off than other methods because it has

tax savings as its primary objective. It usually gives little consideration to actual year-toyear change in value. Thus, for accounting purposes, other methods are more
For tax purposes, property is classified as follows:i) 3 year property - automobiles and light-duty trucks used for business purposes and
certain special tools, and depreciable property with a midpoint life of 4 years or less.
ii) 5 year property - most farm equipment, grain bins, single purpose structures and
fences, breeding beef and dairy cattle, office equipment and office furniture.
iii) 10 year property- includes depreciable property with an expected life between 10 and
12.4 years.
iv) 15 year property - buildings.
The straight line method computes depreciation, Ds, as follows:

OC = Original cost or basis
SV = Salvage value
L = expected useful life of the asset in the business.
Declining balance method calculates depreciation as:Dd = RV x R
RV = undepreciated value of the asset at the start of the accounting period such that, in
year 1, RV = OC, and in succeeding years,
RVi = [RVi-1 - Dd,i-1] x R (with salvage value not being deducted from original value before
computing depreciation),
R = the depreciation rate, which may be up to twice the rate of decline, 1/L, allowed
under straight line method.
Sum of the year-digits method estimates the depreciation of an asset as follows:-

RY = estimated years of useful life remaining

S = sum of the numbers representing years of useful life (i.e. for an asset with 5 years
useful life, S would be 1+2+3+4+5 = 15).
b) Interest costs (rates) are incurred by a company when owned or borrowed funds are
invested in durable assets, because such money is tied up and cannot be used for other
purposes. On borrowed money, there will be a regular interest payment, a standing
obligation which must be met regardless of the level of use of the asset purchased with
the borrowed money. Also, an interest charge should be calculated on equity capital. In
this case, the charge would be an opportunity interest cost. An annual charge should be
made because the money invested has alternative productive uses, which may range
from earning interest on a savings account to increasing production.
c) Repairs costs are principally variable costs incurred on assets because of the level of
use of the assets through wear and tear. Some durable assets, however, deteriorate with
time even though they are not used. Fences, buildings and some moving parts on
machinery and equipment are prime examples, although they deteriorate even more
rapidly with use.
d) Taxes are fixed costs that are usually incurred on machinery, buildings and some
other durable assets. Taxes are usually not related to the level of use or productive
services provided. Thus, any investment analysis that ignores the annual tax obligation
associated with the proposed investment will be incomplete.
e) Insurance costs are also fixed costs that are incurred when a financed asset is
purchased and has to be protected against fire, weather, theft, etc. Usually, lenders
require that a financed asset be insured as a meant of security for the loan. Some
operators, particularly those with low equity, also insure some of their more valuable
assets because of the strain the loss of those assets would place on the financial
condition of the business. In this country, the major insurance companies are Old Mutual
Insurance and General Accident Insurance, Minet Insurance, Prudential Insurance, etc.
Now attempt exercise 3.5.
Exercise 3.5 Computation of depreciation
Using the straight line, declining balance, and sum of the year-digits methods, compute
and tabulate the depreciation of a $1,000 asset with an estimated 10 years' life and
projected salvage value of 10% of the original cost. (Assume for the declining balance
method a depreciation rate calculated as 20% of the value at the beginning of the year.
Usually the rate may not be greater than twice the rate which would be used under the
straight line method).

What are cranes.

A crane is a type of machine, generally equipped with a hoist, wire ropes or chains,
and sheaves, that can be used both to lift and lower materials and to move them horizontally. It is
mainly used for lifting heavy things and transporting them to other places. It uses one or
more simple machines to create mechanical advantage and thus move loads beyond the normal
capability of a human. Cranes are commonly employed in the transport industry for the loading
and unloading of freight, in the construction industry for the movement of materials and in the
manufacturing industry for the assembling of heavy equipment.

The first construction cranes were invented by the Ancient Greeks and were powered by men or
beasts of burden, such as donkeys. These cranes were used for the construction of tall buildings.
Larger cranes were later developed, employing the use of human treadwheels, permitting the
lifting of heavier weights. In the High Middle Ages, harbour cranes were introduced to load and
unload ships and assist with their construction some were built into stone towers for extra
strength and stability. The earliest cranes were constructed from wood, but cast
iron and steel took over with the coming of the Industrial Revolution.
For many centuries, power was supplied by the physical exertion of men or animals, although
hoists in watermills and windmills could be driven by the harnessed natural power. The first
'mechanical' power was provided by steam engines, the earliest steam crane being introduced in
the 18th or 19th century, with many remaining in use well into the late 20th century. Modern
cranes usually use internal combustion engines or electric motors andhydraulic systems to
provide a much greater lifting capability than was previously possible, although manual cranes
are still utilized where the provision of power would be uneconomic.
Cranes exist in an enormous variety of forms each tailored to a specific use. Sometimes sizes
range from the smallest jib cranes, used inside workshops, to the tallest tower cranes, used for
constructing high buildings. Mini-cranes are also used for constructing high buildings, in order to
facilitate constructions by reaching tight spaces. Finally, we can find larger floating cranes,
generally used to build oil rigs and salvage sunken ships.
Some lifting machines do not strictly fit the above definition of a crane, but are generally known
as cranes, such as stacker cranes and loader cranes

5 types of mobile cranes and what they're used for

by Ritchie Bros October 10, 2012 Equipment spotlight Comments

Cranes have played an important part in constructing houses, buildings, cities, and nations
throughout history. Today, cranes are hard at work in factories, at shipyards, on container vessels
and even on barges.
Ritchie Bros. helps companies all over the world sell and buy cranes, including these five mobile
cranes commonly found at construction sites and at our ports:

This 2009 Grove TMS880E 80 ton hydraulic truck crane sold for US $480,000 at our Denver, CO
auction in 2011

Hydraulic Truck Cranes

The standard in mobile cranes, hydraulic truck cranes can lift thousands of pounds using hydraulics
that rely on forces transmitted through oil pushing the boom's pistons in opposite directions.
Hydraulic truck cranes are essential to building major projects like bridges, buildings, airports,
roadways, and more.

This 2008 Terex Demag AC60/3L 60 ton all terrain crane sold for EUR $230,000 at our Ocana, Spain
auction in 2011

All Terrain Cranes

All terrain cranes are multi-functional cranes designed to be driven on both smooth paved highways
or off-road at speeds up to 40 mph.
They were developed in 1981 by Liebherr out of a need for telescopic cranes in the construction of
3,100 miles of gas pipelines and pumping stations in Siberia.
Typically all-wheel drive, all terrain cranes are powered by one or two engines and feature
hydraulically operated winches and a telescopic boom that can reach close to 200 feet and carry up
to 130 tons on some models.

This 2009 Grove RT540E 40 ton rough terrain crane sold for US $315,000 at our Dubai auction in

Rough Terrain Cranes

A type of hydraulic crane, rough terrain cranes are designed to operate specifically off-road on
rough terrain thanks to their all-wheel drive capabilities and rubber tires.
Rough terrain cranes are used for pick-and-carry operations like bridge-building and large
construction projects where high maneuverability and lifting capacity is needed.
They are not typically allowed on public highways, except in Japan, and must be transported to the
work site by truck or lowboy.

This 2008 Liebherr HS835HD 50 ton crawler crane sold for EUR $227,500 at our Ocana, Spain auction
in 2011

Crawler Cranes
Crawler cranes are a type of tracked mobile crane available with either telescopic or lattice
booms. Because they are self-propelled they are able to move around a construction site and
perform jobs without much set-up. They are however very expensive to transport from site to site
because of their great size and weight.
Crawler crane tracks provide additional stability, allowing a crawler crane to operate without the
use of outriggers, though some models do include them.

This 2006 Grove YB5518 18 ton carry deck crane sold for US $77,500 at our Fort Worth, TX auction
in 2012

Carry Deck Cranes

Carry deck cranes are smaller mobile cranes that travel on four wheels and are capable of rotating
their boom a full 360-degrees.
An American invention, carry deck cranes are designed to work in confined spaces and can
transport the loads they pick up on the small built-in deck around their cab.

Reciprocating pump

Reciprocating pump attached to a Windmill on a farm.

A reciprocating pump is a positive plunger pump. It is often used where relatively small quantity
of liquid is to be handled and where delivery pressure is quite large.In reciprocating pumps, the
chamber in which the liquid is trapped, is a stationary cylinder that contains piston or plunger
Piston pump, plunger pumps, and diaphragm pumps are example of reciprocating pump.

-Types of Reciprocating Positive Displacement Pumps:

Piston Pump

Reciprocating pumps can have two types of reciprocating part, a piston or a diaphragm and based on
this, reciprocating pumps can be piston or diaphragm pumps. Each type has different features
suitable for specific applications. Read in this article construction, working and variants of Piston

Piston Pump - Construction

A Piston Pump is very similar in construction to a Reciprocating Internal Combustion Engine. The
basic pumping action is obtained by reciprocation of a piston in a cylinder. The cylinder has two
valves, one inlet and one outlet valve. And they allow for only inwards and outwards movement of the
liquid respectively. These valves are situated in inlet and outlet manifold respectively. The piston is
connected to a crankshaft through a connecting rod. The Piston Pump has a liner made of leather or
any other synthetic material to provide proper sealing between the moving surfaces of the piston and

the cylinder.
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Piston Pump - Working

The reciprocating action of the piston is obtained by crankshaft arrangement and guide path provided
by the cylinder. The piston is connected to the crankshaft through the connecting rod which is coupled
with the crankshaft through a revolute joint situated at some distance from the crankshaft axis. This
distance can be called as crank length or the eccentric distance. It is this crank length which
determines the stroke length of a piston pump.
The crankshaft is coupled to an electric motor or an engine shaft. As the crankshaft rotates the piston
reciprocates. In one cycle of the crankshaft the piston reciprocates once, that is, moves one stroke
forward and one backward. The intake and discharge of the liquid by a piston pump is basically the

same as reciprocating pumps in general as discussed in previous article under working of

reciprocating pumps.

Piston Pump - Variants

The basic Piston Pump has single piston cylinder arrangement with intake and discharge of liquid
through one side only. Piston Pumps are available is different configuration and each being suitable
for particular application. The discharge of a piston pump can be changed by varying the stroke length
of the piston. The common variants of the Piston or Plunger Pumps are:
Single Acting Piston Pump Having liquid chamber on only one side of the piston and valve
arrangement on that side only. The liquid is discharged from one side of the cylinder once in a
crankshaft cycle, only in the forward stroke of the piston.
Double Acting Piston Pump Both sides of the piston have liquid chamber and the valve
arrangement. Liquid is discharged from both the sides, from one side in the first half of the cycle and
from the other side in the second half of the crankshaft cycle. As the liquid is discharged in both the
forward and backward stroke, the discharge is more per cycle and also smooth as compared to the
Single Acting pump.
Duplex Pump There are two piston-cylinders assemblies. Both the pistons are coupled to the single
crankshaft through separate connecting rod of each. The connecting rods are coupled to the
crankshaft at an angular distance of 180 degrees from each other. Each piston-cylinder can be single
acting or double acting.
Triplex Pump There are three piston-cylinder assemblies. All the three pistons are coupled to the
single crankshaft through the connecting rod of each. There is an angular separation of 120 degrees
between any two adjacent connecting rod and crankshaft couplings.

Fluid Pump or Hydraulic Pump is a machine which transfers the energy from its moving parts to the
fluid passing through the machine. The energy transferred from the Pump to the fluid appears as the
pressure and velocity of the fluid. Know more about Fluid or Hydraulic Pumps in this article series .

What is a centrifuge?

Photo: A clothes washer drum is a type of centrifuge. During the wash cycle, the paddles agitate the
clothes in the soapy water. When it comes to the spin, holes in the drum let the water out.

Hold something heavy in one hand and whirl your arm around your head.
Feel a force that seems to be pulling your shoulder out of its socket? That's
the principle of the centrifuge at workand you can look at it from two
different angles. In popular books and magazines, people talk about
something called centrifugal force: the force that seems to make things
shoot outward when they go round in a circle. So, when a bus goes around
a bend at high speed, you'll read that it's centrifugal force trying to tip the
thing over. When your clothes are spinning in the drum, it's centrifugal force
that throws the water out through the little holes so your washing ends up
much drier.
Or is it?
Centrifugal force or centripetal force?

Science teachers will tell you this is wrong: there is actually no such thing
as centrifugal force. We can understand what's really happening by
considering Isaac Newton's famous laws of motion. When a car begins to
enter a bend, its natural tendency is to keep going in a straight lineand it
will do so unless a force acts on it. When it follows the bend, it does so
because there's a force (called centripetal force) constantly tugging it
inward from its straight line course. What we see as the centrifugal force is
really the car's tendency to go straight, if left to its own devices.
Anytime you hear people talking about centrifugal force, you can quietly
correct them (in your own mind, to be polite!) and translate what they're
saying into centripetal force. So "centrifugal force gets your washing dry
because it makes the water fly out" becomes "Centripetal force between
your clothes and the inside of the drum pushes them around in a circle.
There's nothing to give the water the same kind of push because it can slip
straight through the drum holes. The clothes experience centripetal force,
the water doesn't. The clothes go round in a circle, the water goes in a
straight linestraight through the holes. And that's what gets your washing

Confused? Don't be! It's this simple: if something is moving in a circle,

there must be a force acting on it somewhere to make it turn, otherwise it
would go in a straight line. So look at the situation carefully and figure out
where the inward pushing or pulling force is coming from. That's the
centripetal force. If some part of the object is flying outward, that's not
because there's centrifugal force: it's because there's no centripetal force to
make it go in a circle.

Comparing centrifugal and centripetal force

A car's going around a bend in the road. How do we explain what's

Centrifugal force: Left to its own devices, the car would go in a circle
(blue) but centrifugal force (purple) is constantly trying to push it
outward. (The trouble with this is that it doesn't explain why the car is
going in a circle.)
Centripetal force: Left to its own devices, the car would go in a
straight line (orange), but centripetal force pulls it inward (green), so it
actually goes round in a circle (red).

You can also see now where these two funny words come from. Centrifugal
(pronouncedsen-tree-few-gul or sen-trif-ugul is related to the word "fugue",
from the latin word for flight, so we're talking about something trying to get
away from the center. Centripetal (pronounced sen-trip-itul or sen-tree-peetul) comes from the Latin "petere", meaning seek, so we're describing a
force that makes things seek the center:
Centrifugal = "center fleeing"
Centripetal = "center seeking"
How big is centripetal force?

Why is there always a centripetal force when things move in circles? Think
back to the laws of motion. If something is following a curved path, its
velocity is changing all the time because its direction is changing all the
time. If the velocity is changing, it's accelerating (even if its speed is
constant). If it's accelerating, a force must be actingsometimes a very big
force. All these statements follow directly from the laws of motion.

Photo: Now that's what I call a centrifuge! You can see how big it is from the little man standing in the
bottom, center, wearing a red safety hat. This is the launch-phase simulator that NASA uses to see if
pieces of spacecraft (and even whole satellites) can withstand extreme forces. The huge spinning
arms are powered by two 1250-horsepower motors and produce forces up to 30g (30 times the force
of gravity or 15 times the force you feel on a typical roller coaster). Photo by courtesy of NASA
Goddard Space Flight Center and Great Images in NASA.

Spin things at high speeds and you build up big forces very quickly. You'll
have seen that very clearly if you've ever washed something like a heavy
pair of curtains in a clothes washing machine and they've bunched up on
one side of the drum. When it comes to the final spin, the machine will be
banging and clattering about and doing its level best to escape from your
kitchen (probably damaging itself in the process). When things spin at high
speed, the forces involved can be huge. That's why it's best to balance your
washing machine with a mixed load (never, ever wash one item by itself)
and why you need to balance laboratory centrifuges very carefully as well.
How big are centripetal forces, exactly? The laws of physics tell us that the
centripetal force needed to make an object go round in a circle is given by
this little equation:

F =(mv2)/r
Here, m is the mass of the object, v is the velocity, and r is the radius of the
circle. So the bigger the mass of the object and the faster it goes, the more
force is needed to keep it turning.
Let's try out some real numbers. Say you have a 1000kg car going round a
bend of 50m radius at 40mph (roughly 20m/s). The force between the tires
and the road is 1000 x 20 x 20 / 50 = 8000 newtons or roughly 10 times a
typical person's weight. Where does the centripetal force come from when
a car goes round a bend? There's only one place it can come from: the
friction between the tires and the road. Ten times a person's weight is quite
a lot of force for four little rubber tires to provide, especially when you
consider that only a tiny patch of each tire is ever touching the road
surface. Now make the bend twice as tight and you'll see the force is
doubled to 16,000 newtons (because r is halved). If the car doubles its
speed (v is doubled), the force is quadrupled to 32,000 newtons (40 times a
person's weightor a force equal to 10 people weighing on each tire).
That's why you're much more likely to skid at high speeds: friction between
your car tires and the road can't provide enough centripetal force to keep
you going in a circle, so you whiz off at a tangent: you bow to your natural
tendency and keep going in a straight line.

What are centrifuges used for?

Now forget all about the spinning: if you need a big force quite quickly, a
centrifuge is a really handy way to generate one. Because you're spinning
on the spot, you don't need lots of space. That makes centrifuges perfect
for use in scientific laboratories. One of the most common uses for
centrifuges is in separating mixtures of things. A washing machine is a
mixture of clothes and water and the spinning drum separates those very
efficiently. Laboratory centrifuges are used to separate things like blood,
which consists of red blood cells suspended in plasma (a yellowish fluid).
Put some blood in a test-tube and spin it at high speed and you separate
out these two components very quickly, with the plasma at the top of the
tube and the red blood cells at the bottom. (They travel to the bottom
because they're heavier, so need more centripetal force to push them round
in a circle. The force comes from the bottom of the tube pushing inward
against the blood cells clumped there.)

Photo: Left: Loading up a laboratory centrifuge with samples in test tubes. Note that you can do lots of
test tubes at the same time, but you have to make sure the machine is balanced with matching
numbers of tubes on each side of the spinning arms. Photo by Scott H. Spitzer courtesy of US Air
Force and Defense Imagery.
Right: This is what samples look like when they've been centrifuged. The lighter components (almost
transparent here and quite hard to make out) are at the top of the tube, while the heavier ones (darker
here) are at the bottom. Photo by Jim Yost Photography courtesy of US DOE/NREL (Department of
Energy/National Renewable Energy Laboratory).