5.2. Determining Economic Life

Try these first

1. 1.

   What is the economic useful life of a machine?

   Hint

   Think about cost and profit balance.

2. 2.

   Define downtime in equipment management.

   Hint

   Consider what happens when a machine breaks down.

3. 3.

   What is the main purpose of determining the economic useful life of a machine?

   • To assess compliance
   • To minimize costs
   • To decorate machinery

   Hint

   Think about why businesses strive to make informed financial decisions.

4. 4.

   True or False: Downtime does not affect the operational cost of machinery.

   • True
   • False

   Hint

   Consider what happens when machinery is not working.

5. 5.

   A company spends $200,000 on an excavator that has a lifespan of 10 years. Calculate the economic life if maintenance costs rise significantly after year 6. When should they consider replacement?

   Hint

   Consider both the cost of maintenance and potential earnings.

6. 6.

   During a downtime analysis, a machinery operator finds that a truck becomes idle when an excavator breaks down. How should they analyze the costs incurred due to this downtime?

   Hint

   Consider total costs associated with idle equipment and lost production.