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2 cards from this section. Quick, good the night before a test.
What is depreciation?
Think about how assets lose value.
How do you calculate annual depreciation?
Remember the formula discussed in class.
What is the formula for calculating depreciation?
Look for the formula that includes division by useful life.
True or False: Salvage value affects the calculation of depreciation.
Consider how salvage value is used in the depreciation calculation.
If a piece of equipment has a purchase price of ₹5 crore, a tire cost of ₹15 lakh, and a useful life of 10 years with a salvage value of ₹20 lakh, calculate the annual depreciation and the hourly depreciation assuming 1600 hours of operation per year.
Use the formula for annual depreciation and then divide by annual hours of operation.
An excavator has an initial cost of ₹4 crore, working for 2000 hours annually, with a tire cost of ₹10 lakh and an expected useful life of 12 years. Calculate the total hourly cost, assuming 2% insurance, 3% taxes, and 8% interest.
Break it down into ownership and operating cost to solve.
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