Subtopic: Cost analysis of implements and tractors
Question Statement:
A progressive farmer considers buying a tractor-mounted combine harvester attachment. The annual fixed ownership cost of the machine is $FC = ext{Rs. }\,1,20,000\text{ /year}$. The variable operating cost is $VC = ext{Rs. }\,650\text{ /h}$. The prevailing custom hiring charge for identical harvesting work is $C_h = ext{Rs. }\,1150\text{ /h}$. The break-even annual usage in hours ($\,h\text{/year}$) above which owning the machine is economically superior to custom hiring is ________ (answer in integer).
Answer Key:
240
Step-by-Step Solution & Explanation
```
Break-Even Analysis:
Cost of Ownership = FC + VC * H
Cost of Custom Hiring = C_h * H
At Break-Even: FC + VC * H = C_h * H
```
**Step-by-step Calculation:**
1. At break-even annual usage $H_{\text{bep}}$:
$\text{Total Ownership Cost} = \text{Total Custom Hiring Cost}$
$FC + (VC \times H_{\text{bep}}) = C_h \times H_{\text{bep}}$
2. Rearranging for $H_{\text{bep}}$:
$H_{\text{bep}} = \frac{FC}{C_h - VC}$
3. Substituting values:
$FC = ext{Rs. }\,1,20,000$
$C_h - VC = 1150 - 650 = ext{Rs. }\,500\text{ /h}$
$H_{\text{bep}} = \frac{120000}{500} = 240\text{ hours/year}$