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4 cards from this section. Quick, good the night before a test.
What does economic life refer to?
Think about the costs associated with keeping a machine.
What is depreciation?
Consider how machinery loses value as it ages.
What method can be used to calculate depreciation?
Consider which method accelerates depreciation more.
True or False: A machine’s economic life determines when it is necessary to replace it.
Think about the costs incurred when keeping an aging machine.
An old truck costs $5,000 in maintenance yearly. If its replacement cost increases by 10% annually, how long should it be kept before replacement if it depreciates at a rate of 15% per year?
Calculate yearly costs and compare them over the years.
If a replacement machine will save you $3,000 in efficiency each month but costs $12,000 to purchase, how many months until the replacement is cost-effective?
Consider the total savings versus total cost.
6 more questions in this section. Enroll free to practise them all.
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