1.4. Average Annual Cumulative Cost Calculation

Try these first

1. 1.

   What is the depreciation amount for a machinery with an initial book value of 30,00,000 rupees at a rate of 40%?

   Hint

   Use the formula Depreciation = Book Value * Rate.

2. 2.

   If the annual operating cost is 10,00,000 and the depreciation is 5,00,000, what is the total annual cost?

   Hint

   Total Annual Cost = Operating Cost + Depreciation.

3. 3.

   What formula is used to calculate depreciation?

   Hint

   Think about how you calculate the reduced value of an asset over time.

4. 4.

   True or False: Economic life refers to the maximum age an asset can sustain in operations economically.

   • True
   • False

   Hint

   Recall the purpose of analyzing costs over time.

5. 5.

   If a machine has an initial cost of 15,00,000 rupees, and depreciation is applied annually at a rate of 30%, what will be its value after three years?

   Hint

   Keep track of the book value after each year's depreciation.

6. 6.

   Given a machine has a cumulative cost of 1,20,000 after four years and an operating cost that increases by 5,000 each year starting at 10,000, what is the average annual cost?

   Hint

   Break down the annual costs clearly over the years.