5. Maintenance and Repair Costs

Try these first

1. 1.

   What is economic life?

   Hint

   Think about the time frame of machine usage.

2. 2.

   Name one factor that increases costs after the economic life.

   Hint

   What happens to the machine as it gets older?

3. 3.

   What is the economic life of machinery?

   • The maximum time a machine can run
   • The time period with the lowest holding costs
   • The time when depreciation stops

   Hint

   It's about cost management.

4. 4.

   True or False: Downtime costs increase with machine age.

   • True
   • False

   Hint

   Consider the reliability of older machines.

5. 5.

   A machine starts with a cost of 50,00,000 and has a cumulative maintenance cost of 5,50,000 after 5 years. If its value depreciates to 25,00,000, what is the total cost over the 5 years?

   Hint

   Combine all costs and subtract any revenue generated.

6. 6.

   You have data showing that a machine incurs 1,00,000 in downtime costs due to breakdowns in year six. If maintenance costs increase by 10% annually, what would the total cost be in year six including downtime?

   Hint

   Calculate the new maintenance cost first, then add downtime costs.