4.1. Equipment Replacement Analysis Overview

Try these first

1. 1.

   What is the downtime cost per hour for equipment costing 900 rupees with a downtime percentage of 3%?

   Hint

   Remember to calculate 3% of the total cost.

2. 2.

   How much is the yearly downtime cost for a machine operating 2000 hours at a rate of 27 rupees per hour?

   Hint

   Multiply the downtime cost per hour by the total operating hours.

3. 3.

   What is downtime cost calculated as?

   • Total Equipment Cost
   • Equipment Cost × Downtime Percentage
   • Operating Hours

   Hint

   Focus on how we derive the cost based on a percentage.

4. 4.

   True or False: Obsolescence cost increases as the equipment ages.

   • True
   • False

   Hint

   Consider what happens as machines age over time.

5. 5.

   A company has a machine that costs 1,200 rupees/hour and experiences a Downtime of 1.5% in the first year and 3.5% in the second year. Calculate the yearly downtime costs and cumulative downtime cost after two years.

   Hint

   Each year calculate based on operation hours and percentages.

6. 6.

   If the obsolescence cost for the first three years is 0%, 0.05%, and 0.1% respectively, calculate the cumulative obsolescence costs for the third year based on equipment costs of 1,500 rupees/hour.

   Hint

   Summing each year’s obsolescence after calculating respective costs.