Subtopic: Cost analysis of implements and tractors
Question Statement:
A $45\text{ kW}$ farm tractor is purchased for a capital price of $C = ext{Rs. }\,8,00,000$. The useful life of the tractor is $L = 10\text{ years}$ with an estimated salvage value equal to $10\%$ of purchase price. Annual usage is $H = 800\text{ hours/year}$. Using the straight-line depreciation method, the hourly depreciation cost of the tractor in $ ext{Rs. }\text{/h}$ is ________ (answer in integer).
Answer Key:
90
Step-by-Step Solution & Explanation
```
Straight-Line Depreciation:
Purchase Price C = Rs. 8,00,000
Salvage Value S = 10% of C = Rs. 80,000
Useful Life L = 10 years
Annual Use H = 800 h/year
```
**Step-by-step Calculation:**
1. Salvage value ($S$):
$S = 0.10 \times 8,00,000 = ext{Rs. }\,80,000$
2. Total depreciable amount over life:
$C - S = 8,00,000 - 80,000 = ext{Rs. }\,7,20,000$
3. Annual depreciation ($D_a$):
$D_a = \frac{C - S}{L} = \frac{7,20,000}{10} = ext{Rs. }\,72,000\text{ /year}$
4. Depreciation cost per operating hour ($D_h$):
$D_h = \frac{D_a}{H} = \frac{72,000}{800} = ext{Rs. }\,90\text{ /h}$