5.1. Introduction to Peurifoy's Method

Try these first

1. 1.

   What is ownership cost?

   Hint

   Think of costs related to buying and maintaining the machine.

2. 2.

   What factors do we consider in operating costs?

   Hint

   Focus on costs incurred while the machine is being used.

3. 3.

   What is the formula for calculating depreciation?

   Hint

   Remember it involves initial price, tire cost, and useful life.

4. 4.

   True or False: Operating costs include the purchase price of equipment.

   • True
   • False

   Hint

   Consider what happens during the actual operation.

5. 5.

   Given a machine that costs ₹5 crores, has a tire cost of ₹15 lakhs, operates for 2000 hours a year, with a useful life of 15 years. Calculate the annual depreciation.

   Hint

   Apply the formula for depreciation carefully.

6. 6.

   A piece of equipment has an hourly fuel consumption of 0.08 liters/hp, has 400 hp, and the fuel costs ₹70 per liter. Calculate the total hourly fuel cost.

   Hint

   Break it down: consumption multiplied by horsepower and then by fuel cost.