Question Bank • QB_FM_147 NAT • 2 Marks

Section 2: Farm Machinery

Farm Machinery

Subtopic: Cost analysis of implements and tractors

Question Statement:

A tractor costs $\text{Rs. } 7,00,000$ with an estimated economic life of $10\text{ years}$ and an annual usage of $1000\text{ hours}$. The salvage value is estimated at $10\%$ of the initial purchase price. Using the straight-line depreciation method, calculate the hourly depreciation cost in $\text{Rs./h}$.

Answer Key:

63

Step-by-Step Solution & Explanation

Purchase price $C = \text{Rs. } 700000$. Salvage value $S = 0.10 \times 700000 = \text{Rs. } 70000$. Total annual depreciation: $D_{\text{annual}} = \frac{C - S}{L} = \frac{700000 - 70000}{10} = \frac{630000}{10} = \text{Rs. } 63000/\text{year}$ Hourly depreciation: $D_{\text{hourly}} = \frac{63000}{1000\text{ h}} = \text{Rs. } 63.0/\text{h}$
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