1.3. Annual Cost Calculation

Try these first

1. 1.

   Calculate the depreciation for a machine worth 50 lakh with a 30% rate.

   Hint

   Use the formula: Depreciation = Purchase Price × Depreciation Rate.

2. 2.

   If a machine's book value is 20 lakh after 2 years with depreciation of 10 lakh, what was its initial cost?

   Hint

   Add book value and accumulated depreciation to find initial cost.

3. 3.

   What is the formula for depreciation?

   • Purchase Price × Depreciation Rate
   • Book Value - Operating Costs
   • Annual Cost / Number of Years

   Hint

   Think about the components that reduce asset value.

4. 4.

   True or False: Annual costs should only include depreciation.

   • True
   • False

   Hint

   Reflect on all costs associated with machinery use.

5. 5.

   A machine is purchased at 50 lakh with a 35% depreciation rate. Calculate its book value after 3 years if it has constant operating costs of 15 lakh per year.

   Hint

   Calculate depreciation each year based on the new book value.

6. 6.

   If a machine costs 30 lakh and has an annual operating cost of 10 lakh but depreciates down to 5 lakh over 5 years, what is the average annual cumulative cost?

   Hint

   Think about all costs when determining overall cost.