3.1 - Replacement Cost Estimates
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Practice Questions
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What is economic life?
💡 Hint: Think about the phrase 'minimum cost of holding'.
What is one reason machines become obsolete?
💡 Hint: Consider what happens when new machines are introduced.
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Interactive Quizzes
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What is economic life?
💡 Hint: Think 'minimized costs' when referring to economic life.
True or False: Obsolescence affects a machine's salvage value.
💡 Hint: Obsolescence and value are interconnected.
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Challenge Problems
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Calculate the total replacement cost after four years for a machine starting at 35,00,000 with 2,10,000 annual increases. Also, factor in a depreciation of 1,00,000 per year after its third year.
💡 Hint: Sum all increases and account for depreciation appropriately.
If a machine has a downtime cost of 500 per hour and it is down for 30 hours due to repairs, calculate the total downtime loss.
💡 Hint: Multiply the hourly cost by the total hour lost.
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