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Constructionsite Economic use of Plant Ron Gatepain.

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Presentation on theme: "Constructionsite Economic use of Plant Ron Gatepain."— Presentation transcript:

1 constructionsite Economic use of Plant Ron Gatepain

2 constructionsite These factors considered at the planning stage what a machine will do, what it can not do

3 constructionsite position, if fixed, materials must be fed to them and taken from them. This involves – access routes, – road surfaces, – transport – stability of hard standing, – space required

4 constructionsite Economic Aspects Utilisation of the plant will determine if the plant is to be bought or hired Consider the alternative methods and plant available for a specific job. Consider the amount of capital tied up in the plant, consequently interest on any money borrowed must come into the calculations, or loss of interest if paid for with cash.

5 constructionsite The decision to purchase plant should consider the following: The working life of the plant ‑ depends on use and maintenance Utilisation of plant. A rate is set by the time it is available for use on a contract. Standing time and maintenance time must also be considered Depreciation. This will be greater in the first few years

6 constructionsite Obsolescence. Plant can become obsolescent before it has finished its useful working life Replacement costs should allow for inflation, and this should be built into the rate set, this may mean revising the rate annually Interest charges or loss of interest

7 constructionsite Maintenance costs, including labour, materials, any plant department overheads Insurance, licenses a percentage for contingencies and profit.

8 constructionsite Management Decisions Own plant which is used regularly Hire that which is only required occasionally Do not make do with the companies own plant rather than hire For large projects over a long period of time it may be better to purchase plant for that contract and then resell on completion, allowed for in the pricing of the contract.

9 constructionsite Output and Costs Estimated output from plant obtainable from literature or experience - will determine the length of time the plant is required and the cost to the contract. The cost of transport to and from the site should also be taken into account.

10 constructionsite Statutory Requirements A number of legal requirements relate to plant, these are covered by the following legislation: Health and Safety at Work etc Act 1974 Supply of Machinery (Safety) Regulations 1992 Management of Health and Safety at Work Regulations Construction (Design and Management) Regulations 1994 Construction (Health, Safety and Welfare) Regulations 1996 Provision and Use of Work Equipment Regulations 1998

11 constructionsite Depreciation of Plant Plant will depreciate over a period of time This must be allowed for in order to purchase new plant and to show the decrease in value in the company's account. This may be done in a number of ways:

12 constructionsite Revaluation The asset is revalued at the end of each financial year and the current market value is taken basis for the balance sheet valuation, thus depreciation will be the loss in value since the last valuation. Example: - a van is purchased for £8000, at the end of the financial year it is valued at £6500, so the depreciation is £1500.

13 constructionsite Fixed installment or Straight-line method The working life of an item is estimated, as is its scrap value at the end of that life. The scrap value is deducted from the cost price and the net figure obtained by dividing by the number of working years, which will give the annual charge for depreciation. Example: - A concrete mixer costing £550 is estimated at having a working live of 5 years at the end of which time its scrap value will be £50. Annual depreciation = £550 - 50 = 500 = £100 per annum 5 5

14 constructionsite Percentage of diminishing balance Most assets lose a larger proportion of their value during the first year of their life than they do in the second year, and more in the second than the third. To account for this a percentage is taken, based on the balance brought on the asset account.

15 constructionsite Example: - A jig costing £2000 is to be depreciated by 20 per cent per annum on the diminishing balance. The amount of depreciation for the first two years will be as follows.

16 constructionsite £ Cost price year 12000 Depreciation, 20%400 Balance1600 Depreciation, 20%320 Balance1280 Depreciation for the two years is £400 + £320 = £720

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