Alright, Flip. Here's a question on one of my take-home exams I want your opinion on.
Had to figure out the total machine costs of operating a logging business. Machine costs includes labor, total fixed costs, and variable costs (fuel,lube,repair and maintenance).
The next question I had to figure out the weekly costs using a declining balance loan payment for the equipment costs.
The next question asks which is the "right" cost, the machine costs or the declining balance loan payment cost. This is where I get confused. I know the machine costs takes into consideration estimates and is not what you actually pay. However the weekly costs on the loan payment do not take into consideration the variable costs you would have to pay for each week while operating the machinery. I want to say the declining loan payment is the "right" costs, but you still have to pay for gas and shit.
What do you think?