2.1. Second Year Obsolescence Cost

Try these first

1. 1.

   What is the downtime cost per hour if the equipment cost is 900 rupees and the downtime percentage is 3%?

   Hint

   Use the formula: (Downtime % * Equipment Cost) / 100.

2. 2.

   Calculate the yearly downtime cost if the downtime cost per hour is 27 rupees and the machine operates for 2000 hours.

   Hint

   Multiply the hourly cost by the total operating hours.

3. 3.

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

   • 27 rupees
   • 54 rupees
   • 30 rupees

   Hint

   Remember the formula for downtime cost.

4. 4.

   True or False: The obsolescence cost increases as the machine ages.

   • True
   • False

   Hint

   Think about the conditions of equipment over time.

5. 5.

   A company operates a machine costing 900 rupees per hour, facing 6% downtime in its second year, which then affects its productivity factor of 0.97 in the third year. Calculate the total cumulative cost at the end of the third year with both downtime and obsolescence factors.

   Hint

   Ensure you factor in both downtime and obsolescence rates correctly.

6. 6.

   Describe and analyze the financial repercussions if the machine, operational for four years, has not been replaced when it reaches a critical obsolescence cost per hour significantly over competitive technology prices. Include calculations of both immediate and projected future expenses.

   Hint

   Utilize cumulative cost methodologies and analyze over projected operational hours.