3.3 - Importance of Accurate Cost Estimation
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Practice Questions
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Calculate the downtime cost per hour if the machine cost is 1,200 rupees and the downtime percentage is 5%.
💡 Hint: Use the formula: Downtime Cost = (Percentage x Equipment Cost) / 100.
What is the cumulative cost at the end of the first year if the yearly downtime cost is 54,000 rupees?
💡 Hint: Remember cumulative cost is the addition of costs over time.
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Interactive Quizzes
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What is the downtime cost per hour if the machinery costs 1,000 rupees and the downtime percentage is 4%?
💡 Hint: Use the percentage formula.
True or False: The economic life of a machine is when its cumulative costs are at their highest.
💡 Hint: Think about the concept of minimizing costs.
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Challenge Problems
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A company has a machine with a purchase cost of 1,200 rupees. Downtime costs start at 2% in the first year and grow to 10% in the fifth year. Calculate the total downtime cost across five years if the machine operates 2,000 hours annually and provide insights on decision making for replacement.
💡 Hint: Calculate each year separately and observe trends.
If the obsolescence costs of a machine are projected to rise 5% per year starting from 45 rupees in year two, forecast the obsolescence costs for years 3 to 8. Discuss the implications of these costs in relation to equipment lifecycle management.
💡 Hint: Evaluate each year's percentage increase and total cumulative effect.
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