3.2. Depreciation Calculation

Try these first

1. 1.

   Define economic life in your own words.

   Hint

   Think about how costs and machine performance relate.

2. 2.

   What is depreciation?

   Hint

   Consider how machines lose value over time.

3. 3.

   What is economic life?

   • The period of maximum cost
   • The period during which costs are minimized
   • The period of machine breakdown

   Hint

   Think about how costs change over time.

4. 4.

   True or False: Depreciation reflects a loss in an asset's value over time.

   • True
   • False

   Hint

   Consider how assets are valued over time.

5. 5.

   If a machine is purchased for ₹10,00,000, with a salvage value of ₹1,00,000 and a useful life of 10 years, calculate the yearly depreciation using the straight-line method and assess potential impacts of inflation.

   Hint

   Think about how inflation compounds over time.

6. 6.

   Explain how a change in technology could influence the obsolescence of machinery and your decision to replace it.

   Hint

   Consider the market competitiveness and technological advancements.