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Answer :
To calculate the equipment cost (Ceq) to run a lathe, we can use straight-line depreciation over the lathe's useful life. With an initial cost of $80,000 and an expected life of 9 years, we need to determine the annual depreciation expense and then divide it by the number of weeks the lathe is operated per year.
The annual depreciation expense for the lathe can be calculated by dividing the initial cost ($80,000) by the useful life (9 years). This gives us an annual depreciation expense of $8,888.89. Since the lathe is operated for 48 weeks per year, we can calculate the cost per week by dividing the annual depreciation expense by 48. Therefore, the equipment cost (Ceq) to run the lathe per week is approximately $185.19. This represents the allocated cost of the lathe per week of operation based on the straight-line depreciation method.
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