Practice Cumulative Maintenance Costs (5.2) - Economic Life of a Machine

Practice: Cumulative Maintenance Costs

Lesson 5.2Economic Life of a Machine

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9 questions

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6 sample questions

Question 1.
What is economic life?
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Think about when holding costs are minimized.
Question 2.
Define depreciation.
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It's a way to measure an asset's declining worth.
3Question 3.
What is the economic life of machinery?
- Short period of highest efficiency
- The longest time a machine can operate
- Cost-effective operational period
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Focus on cost-effectiveness.
4Question 4.
True or False: Downtime costs decrease as the machine's age increases.
- True
- False
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Think about how older machines perform.
Question 5.
A company has machinery that was purchased for 50,00,000 with a useful life of 10 years. Calculate the depreciation for Year 1 and Year 2 using the double declining balance method.
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Apply the formula to find the book value each year.
Question 6.
Calculate the cumulative maintenance costs if yearly repair costs are estimated to start at 1,00,000 and increase by 5% annually. Determine the cumulative cost after five years.
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Add each year's increasing repair cost to find the total.

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