3. Summary of Costs and Economic Life Assessment

Try these first

1. 1.

   Calculate the downtime cost per hour if the equipment cost is 1,200 rupees and the downtime percentage is 4%.

   Hint

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

2. 2.

   What is considered cumulative cost?

   Hint

   Think about the meaning of the term 'cumulative'.

3. 3.

   What is the downtime cost per hour if the equipment cost is 900 rupees at a downtime percentage of 3%?

   • 21 rupees
   • 27 rupees
   • 30 rupees

   Hint

   Reference the formula for calculating downtime.

4. 4.

   True or False: The economic life of a machine occurs when cumulative costs are at their maximum.

   • True
   • False

   Hint

   Think about the cost trends discussed.

5. 5.

   Given that a machine has a downtime cost of 50 rupees per hour for year one, increasing to 80 rupees in year two, calculate the cumulative downtime cost for three years if year three sees an increase to 100 rupees.

   Hint

   Remember to factor in operational hours for each year.

6. 6.

   Calculate the obsolescence cost for a machine that has a cost of 1,200 rupees per hour with an obsolescence factor of 0.15 in the third year.

   Hint

   Use the obsolescence formula and multiply by yearly hours.