What does cyclical replacement mean? Question 22 options: Replacement based on t

Question

What does cyclical replacement mean?

Question 22 options:

Replacement based on the concept of external rate of return

Replacement based on the concept of economic life

Replacement based on the concept of sunk costs

Replacement based on the concept of One Year Rule

Replacement based on the concept of economic business cycles

Replacement based on the concept of external rate of return

Replacement based on the concept of economic life

Replacement based on the concept of sunk costs

Replacement based on the concept of One Year Rule

Replacement based on the concept of economic business cycles

Explanation / Answer

Answer - Replacement based on concept of economic life.

Reason - Cyclical replacement are performed on a schedule just like planned maintenance, except in this case you are replacing the equipment as it reaches the end of its useful life before it completely fails. Cyclical repairs occur on a set schedule, including every five, 10 and 15 years. Some replacements may even happen every 20 years. By planning far into the future for costly upgrades and replacements, you are giving yourself time to finance the equipment and labor costs, which decreases the financial burden as well.

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