Final answer:
The depreciation part of machine ownership cost can be calculated using the Annual Average Investment (AAI) method. This method involves dividing the cost of the machine by its useful life to determine the depreciation expense per year. Depreciation expense represents the decline in the value of the machine over time.
Step-by-step explanation:
The depreciation part of machine ownership cost can be calculated using the Annual Average Investment (AAI) method. In this method, the depreciation expense is determined by dividing the cost of the machine by its useful life.
For example, if the machine costs $10,000 and has a useful life of 5 years, the depreciation expense per year would be $10,000 / 5 = $2,000.
This depreciation expense represents the decline in the value of the machine over time, which is an important cost to consider when calculating the overall ownership cost of the machine.