6.1. Total Operating Cost Calculation

Try these first

1. 1.

   What is the formula for calculating annualized cost from the initial cost?

   Hint

   Refer to the uniform series capital recovery factor.

2. 2.

   What does salvage value represent?

   Hint

   Think about how machinery is valued once it's no longer in service.

3. 3.

   What is the formula to calculate annualized cost from the initial cost?

   • IC × [i(1+i)^n] / [(1+i)^n - 1]
   • IC / (1 + i) ^ n
   • IC × i / n

   Hint

   It involves both interest rates and time.

4. 4.

   True or False: The salvage value is always 100% of the initial cost after its useful life.

   • True
   • False

   Hint

   Think about what happens to assets over time.

5. 5.

   Using an initial machinery cost of ₹ 4,00,00,000, with an interest rate of 7% over 10 years and a salvage value of 15%, calculate the annualized cost and the hourly depreciation if the machine operates for 2000 hours a year.

   Hint

   Ensure to calculate each component stepwise for accuracy.

6. 6.

   If fuel costs increase by 20% and the operating efficiency improves by 10%, how does this affect the total operating cost? Calculate the new total considering original costs ₹ 1150 for fuel, ₹ 361 for insurance, and various other costs.

   Hint

   Focus on re-evaluating just the fuel component to begin.