3.1. Hourly Depreciation Calculation

Try these first

1. 1.

   What is the purpose of calculating hourly depreciation?

   Hint

   Think about the implications on overall costs.

2. 2.

   Name the formula used to calculate annualized costs.

   Hint

   This includes interest rates and time.

3. 3.

   What does the salvage value refer to?

   • End-of-life value
   • Initial purchase price
   • Annualized profit

   Hint

   Think about the worth of an item after use.

4. 4.

   True or False: Hourly depreciation is derived from annualized costs divided by the number of hours the machine is used per year.

   • True
   • False

   Hint

   Pay attention to the relationship between time and costs.

5. 5.

   A contractor buys equipment worth ₹2,00,00,000. If the equipment has a lifespan of 10 years and a salvage value of ₹40,00,000, calculate the annualized cost and hourly depreciation based on average yearly use of 2500 hours.

   Hint

   Focus on calculating the annual amounts first, then derive to hourly costs.

6. 6.

   Discuss how changes in the salvage value affect both annual costs and hourly depreciation. Provide examples.

   Hint

   Examine the relationships between salvage value and depreciation calculations.