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3 cards from this section. Quick, good the night before a test.
What does depreciation represent?
Think about the machine's value decreasing.
How do you calculate the first year's depreciation for a 28 lakh machine at 40%?
Multiply the book value by the percentage.
What formula do we use to calculate depreciation?
Think about how depreciation relates to book value.
True or False: The average annual cumulative cost can help determine when to replace a machine.
Relate this to the replacement decision processes.
Given a machine costs 30 lakh, with depreciation at 0.4, calculate the book value after three years if the operating costs increase by 2 lakh each year starting from 10 lakh.
Use the depreciation for calculating the new book value each year.
If the maximum profit period occurs at year 6 with a profit of 9 lakh, but the current loader’s profit in year 5 is 7 lakh, should a replacement be planned?
Compare the profits across the two machines to decide.
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