Practice Equipment Replacement Analysis Overview (4.1) - Downtime Cost Calculation

Practice: Equipment Replacement Analysis Overview

Lesson 4.1Downtime Cost Calculation

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8 questions

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6 sample questions

Question 1.
What is the downtime cost per hour for equipment costing 900 rupees with a downtime percentage of 3%?
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Remember to calculate 3% of the total cost.
Question 2.
How much is the yearly downtime cost for a machine operating 2000 hours at a rate of 27 rupees per hour?
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Multiply the downtime cost per hour by the total operating hours.
3Question 3.
What is downtime cost calculated as?
- Total Equipment Cost
- Equipment Cost × Downtime Percentage
- Operating Hours
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Focus on how we derive the cost based on a percentage.
4Question 4.
True or False: Obsolescence cost increases as the equipment ages.
- True
- False
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Consider what happens as machines age over time.
Question 5.
A company has a machine that costs 1,200 rupees/hour and experiences a Downtime of 1.5% in the first year and 3.5% in the second year. Calculate the yearly downtime costs and cumulative downtime cost after two years.
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Each year calculate based on operation hours and percentages.
Question 6.
If the obsolescence cost for the first three years is 0%, 0.05%, and 0.1% respectively, calculate the cumulative obsolescence costs for the third year based on equipment costs of 1,500 rupees/hour.
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Summing each year’s obsolescence after calculating respective costs.

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