3.2. Economic Life of the Machine

Try these first

1. 1.

   Calculate the downtime cost per hour for a machine costing 900 rupees with a downtime rate of 4%.

   Hint

   Multiply the equipment cost by the downtime percentage.

2. 2.

   What is the yearly obsolescence cost at 0.1 for a machine costing 900 rupees?

   Hint

   Calculate the per-hour obsolescence cost and multiply by operating hours for the year.

3. 3.

   What percentage of downtime results in a cost of 54 rupees per hour for a machine valued at 900 rupees?

   • 3%
   • 5%
   • 6%

   Hint

   Think about the initial percentage given and how that scales.

4. 4.

   True or False: Obsolescence costs decrease with increasing machine age.

   • True
   • False

   Hint

   Recollect the concepts discussed around equipment aging.

5. 5.

   Given a machine with an initial investment cost of 900 rupees and cumulative downtime costs calculated over 5 years, outline a comprehensive strategy to optimize costs and determine optimal replacement time.

   Hint

   Utilize cumulative calculations and compare yearly expenses.

6. 6.

   Considering a different obsolescence rate than the one in calculations, hypothesize the impact on long-term machinery budgets and analyze the feasibility of early versus late replacements.

   Hint

   Consider both initial investments and long-term maintenance factors.