F.NCINHF.RfXC COST SIIDIFS II 



An fx.implc ol ol)si)lcs(vnci' is ilu- rcpl.K'ciiu-nl of .iiiii(|ii.ilcil 

 nu'tliiHls (it (lisirilmtion l)\ inon- iiiimUtii tyiu-s. ICx.mipU ;> of in.ul- 

 i'(|Ii;h\- art" tin- n-plari'iiioiit of oih-ii wiri-s hy cilili-, and llu> rt-placf- 

 nu-nt of sni.ill caMi's by l.irijiT ones. I'.x.implfs of public ri-(|iiiri'nK'nt 

 are the .ibandonnu-iit of polo linrs and tlii-ir ri-plaivini-iit li\- undi-r- 

 ^round i-otistnu'tion dm- to road iinjirovfiniMUs, and tlu- rdinildinK 

 of si'ctions of undi;r>jrounil conduit dui; to chanijcs in the ^;radc of 

 strt'i-ts or to the construction of transit subways. Kxampiis of 

 extraordinary casualties are fires, sleet storms and tornadoes. 



The annual charge for depreciation is an amount which, if entered 

 in operating expenses each year during; the ser\ ice life of a unit of 

 plant, vvoyld, at the end of that service life, yield a sum ecjual to 

 the total depreciation of that unit; th;it is, its first cost in place less 

 the net siilvagc obtained at its remo\-aI. The consumjition of capital 

 is a necessjiry part of the cost of furnishing stTvice and must be pro- 

 videtl for by charges against earnings during the life of the [)roperty. 

 In arriving at this depreciation charge the best thing we can do is 

 to take our experience of years and look o\cr the vvliole situation 

 and apply our judgment to it. The A'aliie of this judgment depends 

 on the exi^rience. knowledge, abilit\- and iiitegritx fif the (n'ople 

 who exercise it. 



The amoimt of this charge should be determineil for each broad 

 class of plant and it depends upon the a\erage service life and the 

 net salvage value. Net sal\"age value is gross salvage \'aluc minus 

 cost of removal, and takes into consideration both value for reuse 

 and junk value. For instance, the net salvage value of station 

 apparatus is relatively high because a large part of the equipment 

 can be reused in another location. In other cases, such as iron wire, 

 the net salvage value may be a minus quantity, as there is little or 

 nothing to offset the cost of remo\al. 



Current Maintenance. (."urrenl maintenance charges comprise 

 the cost of repairs, rearrangements and changes necessary to keep 

 the plant in an efficient operating condition during its service life. 

 In cost studies, current maintenance charges should be derived from 

 exf)erience and expressed, generalK", on a unit of plant basis, as. 

 for example, per pole, per mile of wire, per foot of cable, or per sta- 

 tion, according to the kind of plant being considered. Cienerally 

 speaking, they bear no direct relation to first cost of plant as other 

 annual charges do. 



I-"or this reason, when comparing the .inruial co>l> ot two or more 

 plant units of different sizes or types, an incorrect result would be 



