HIGHWAY COST KEEPING. 7 
The theory of natural depreciation, epitomized, is that all equipment, 
even if kept in the best of repair, in time will reach a state where re- 
pairs no longer are sufficient to keep it in economical working condi- 
tion and the entire machine must be renewed. The fund created by 
the depreciation charges is intended to supply the money to purchase 
a new machine to take the place of the one expended, or to retire 
the original investment in case the machine no longer is needed. 
Any of the depreciation formulas is satisfactory in determining 
rental charges, provided the assumed life of the machine be approxi- 
mately correct. As the assumption of the useful life of the machine 
may be the source of considerable error, there seems to be little argu- 
ment for the liner calculations as to methods of distributing the 
depreciation. 
It 'will be found convenient in computing depreciation to group 
elements of the plant having approximately the same serviceable life. 
This will have the advantages of requiring fewer accounts and tending 
to equalize high and low assumed machine life. 
Repairs and renewals are charges due to breakage or the wearing 
out of expendable parts of equipment. It is obviously incorrect to 
charge to repairs or renewals any improvements or betterments added 
to any piece of equipment. When such improvements have been 
made the cost should be added to the present value of the 
machine and a new depreciation computed upon this new value. 
An example of such a case would be the addition of a conveyor to an 
old stone crusher for the purpose of doing away with shovelers. The 
The improvement is not a repair of any broken parts or a renewal of 
any part worn out by the continual use of the machine; it is a new 
feature which adds to the value of the crusher. A rebuilt second- 
hand machine may be considered in the same light. 
Interest, taxes, and insurance. — Interest should be charged on the 
investment at the rate paid or the prevailing rate, where there is no 
indebtedness. 
Taxes, as paid, should be charged in the rental rate. 
Insurance should be charged either as paid or at the prevailing rates 
if the organization carries its own risk. 
Fixed charges are discussed further on page 9. A table of plant 
rental is included in the Appendix. 
GENERAL EXPENSES. 
The fourth element of cost is general expense. It often is called 
" overhead'' or "burden," terms derived from factory cost keeping, 
the use of which in highway-cost keeping is not recommended. 
General expense includes all charges that can not be connected 
directly with the cost of labor, material, and plant. For convenience 
in accounting and for the purpose of seeming a desirable division of 
road cost, general expense will be considered as divided into two 
