1. What is Hourly Depreciation?

Hourly Depreciation is the depreciation value of new machines chargeable to the work on an hourly basis. It helps in accurately allocating machine costs to specific projects or work hours.

2. How Does the Calculator Work?

The calculator uses the Hourly Depreciation formula:

Where:

• \( Dh \) — Hourly Depreciation ($)
• \( Cbv \) — Book Value ($)
• \( Ls \) — Life Span (Hours)

Explanation: The formula calculates the hourly depreciation by taking 90% of the book value divided by the machine's total life span in hours.

3. Importance of Hourly Depreciation Calculation

Details: Accurate hourly depreciation calculation is crucial for project costing, equipment budgeting, and financial planning in construction and manufacturing industries.

4. Using the Calculator

Tips: Enter Book Value in dollars, Life Span in hours. Both values must be positive numbers greater than zero.

5. Frequently Asked Questions (FAQ)

Q1: Why is there a 0.9 multiplier in the formula?
A: The 0.9 multiplier accounts for the residual value or salvage value of the machine at the end of its useful life.

Q2: What is included in Book Value?
A: Book Value refers to the value of machine which includes cost of equipment, taxes, insurance and carriage charge.

Q3: How is Life Span determined?
A: Life Span (in Hours) refers to the usage period or total life of a machine, typically based on manufacturer specifications or historical data.

Q4: When should hourly depreciation be calculated?
A: Hourly depreciation should be calculated when machines are used for specific projects or jobs to accurately allocate equipment costs.

Q5: Are there limitations to this calculation?
A: This calculation assumes linear depreciation and may not account for variable usage patterns or maintenance costs over time.