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4 cards from this section. Quick, good the night before a test.
What is depreciation?
It pertains to the worth of machines as they age.
How do you calculate the first year’s depreciation for a machine costing 28 lakh at a rate of 0.4?
Think of it as a percentage of the cost.
What is the first step in determining the replacement timing of machinery?
Think about value loss.
True or False: The minimum cost method suggests replacing equipment when future costs exceed cumulative costs of the new machine.
Focus on cost comparisons.
If a loader depreciates at a steady rate and becomes less productive each year, calculate the depreciation over 5 years. If its original price was 30 lakh, how would you expect to see its value after each year?
Track the yearly decrease using cumulative depreciation.
Given a new machine's minimum average annual cumulative cost is 16 lakh, and the current machine is projected to cost 18 lakh next year, is it time to consider replacement? Discuss the implications.
Consider the cost-benefit balance in machine longevity.
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