Practice Cumulative Investment Costs (4.2) - Economic Life of a Machine

Practice: Cumulative Investment Costs

Lesson 4.2Economic Life of a Machine

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10 questions

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6 sample questions

Question 1.
What is the economic life of a machine?
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Think about the optimal time to replace machinery.
Question 2.
Define depreciation.
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Consider how wear and tear affects machinery.
3Question 3.
What does economic life refer to?
- Period where costs are highest
- Period where costs are lowest
- Time until machine failure
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Consider when a machine is most cost-effective.
4Question 4.
True or False: Depreciation increases the book value of an asset over time.
- True
- False
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Think about how assets lose value.
Question 5.
A machine has a purchase price of 50,00,000 and follows the double declining balance method with an 8-year lifespan. Calculate the depreciation for the first three years.
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Follow the steps for each year and keep track of the book value.
Question 6.
Calculate the cumulative costs of maintenance for a machine where initial maintenance is 2,00,000 growing by 10% each year. Calculate for 5 years.
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Apply the growth factor diligently, and keep adding to find cumulative costs.

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