5.3. Downtime Costs Calculation

Try these first

1. 1.

   What does economic life refer to?

   Hint

   Think about the costs associated with keeping equipment.

2. 2.

   Name two components of total machine costs.

   Hint

   Consider costs that arise during operation and over time.

3. 3.

   What is the economic life of a machine?

   • The time before a machine breaks down
   • The duration to minimize the costs associated with operating the machine
   • The period until the machine becomes obsolete

   Hint

   Think about cost management in machinery.

4. 4.

   True or False: Downtime is the time the machine is operational.

   • True
   • False

   Hint

   Consider the meaning of downtime.

5. 5.

   You have a machine valued at ₹50,00,000 and it's set to depreciate using the Double Declining Balance Method. Calculate the value at the end of year 3 with a useful life of 10 years. Find out the depreciation for each year.

   Hint

   Refer to the formula and apply it for each year calculating depreciation.

6. 6.

   If a machine has an operational cost of ₹750 per hour with projected downtime at 8% for 5,000 hours in a year, calculate the total downtime cost for that year.

   Hint

   Think about how you can calculate lost productivity to find the cost.