6.2. Cost Components in Replacement Analysis

Try these first

1. 1.

   What does inflation cost refer to?

   Hint

   Think about how money value changes over the years.

2. 2.

   Why is downtime cost important?

   Hint

   Consider the effect of a machine being in repair.

3. 3.

   What is the primary focus of downtime cost in equipment management?

   • Profit Optimization
   • Expected Maintenance
   • Productivity Loss
   • Efficiency Gain

   Hint

   Think about what it means for production when a machine is in repair.

4. 4.

   True or False: Inflation reduces the purchasing power of money over time.

   • True
   • False

   Hint

   Remember how goods and services cost more over the years.

5. 5.

   An excavator originally purchased for 20 lakh rupees is now experiencing decreasing productivity due to frequent repairs and an increasing cost for maintenance. Calculate the potential obsolescence cost if newer models offer greater efficiency and lower costs.

   Hint

   Look at how many more rupees you would need for repairs versus the savings from new models.

6. 6.

   Create a cost analysis model that weighs the impact of inflation, downtime, and obsolescence on a fleet of machinery. Justify your reasoning.

   Hint

   Think about how these three factors would interrelate over a five-year period.