2.3. Cumulative Obsolescence Cost

Try these first

1. 1.

   Calculate the downtime cost if the equipment cost is 1200 rupees per hour at 5%.

   Hint

   Use the formula: Cost * Percentage.

2. 2.

   What is the yearly downtime cost if the downtime cost per hour is 30 rupees for 2000 hours?

   Hint

   Multiply by the total operating hours.

3. 3.

   What is the downtime cost per hour for a machine costing 900 rupees at a 3% downtime rate?

   • 27 rupees
   • 30 rupees
   • 54 rupees

   Hint

   Remember to calculate the percentage of the equipment cost.

4. 4.

   True or False: The obsolescence cost increases as machinery ages.

   • True
   • False

   Hint

   Think about how technology evolves.

5. 5.

   If a fleet of machines incurs a total downtime cost of 2,000,000 rupees over five years with varying percentages, calculate the average downtime cost per year.

   Hint

   Consider all years cumulatively and then average them.

6. 6.

   A machine has an obsolescence cost of 0.10 in the fourth year and accumulates costs totaling 520,000 rupees over four years. Determine the total cost due to obsolescence for that year and its contribution to the cumulative costs.

   Hint

   Factor into your calculations the obsolescence percentage.