8. Cost Considerations

Try these first

1. 1.

   What is the definition of Economic Useful Life?

   Hint

   Think about the importance of cost in keeping a machine.

2. 2.

   What do we call the existing equipment in our project?

   Hint

   It is the term for the old machine being used.

3. 3.

   What is the defender in equipment management?

   • New equipment
   • Current equipment
   • Used equipment

   Hint

   Remember the term we used for existing machines.

4. 4.

   True or False: Obsolescence costs can impact replacement decisions.

   • True
   • False

   Hint

   Consider what happens in the market with older machines.

5. 5.

   A company has an excavator with an initial cost of $100,000. It incurs maintenance costs yearly of$10,000, and the projected resale value after 5 years is $30,000. Calculate the total cost of ownership for 5 years.

   Hint

   Add maintenance costs over the 5 years and subtract resale.

6. 6.

   Evaluate the rationale for replacing a concrete mixer that is constantly breaking down, incurring $3,000 in repairs a month. Should it be replaced if a new mixer costs$30,000?

   Hint

   Compare annual repair costs with the purchasing cost of new equipment.