Question Bank • QB_SUB_FM_CST_001 NAT • 2 Marks

Section 2: Farm Machinery

Farm Machinery

Subtopic: Cost analysis of implements and tractors

Question Statement:

A 45 kW tractor was purchased for Rs. 8,00,000. Its useful economic life is estimated as 10 years with an annual usage of 800 hours. The salvage value is 10% of the purchase price. Using the straight-line method, the hourly depreciation charge of the tractor (in Rs./h) is:

Answer Key:

90.0

Step-by-Step Solution & Explanation

Straight-line depreciation formula: $D_{\text{annual}} = \frac{P - S}{L}$ Where: - Initial price $P = \text{Rs. } 8,00,000$ - Salvage value $S = 0.10 \times 8,00,000 = \text{Rs. } 80,000$ - Useful life $L = 10\text{ years}$ $D_{\text{annual}} = \frac{8,00,000 - 80,000}{10} = \frac{7,20,000}{10} = \text{Rs. } 72,000\text{/year}$ Hourly depreciation with 800 hours/year: $D_{\text{hourly}} = \frac{72,000}{800} = 90.00\text{ Rs./h}$
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