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Determine the optimum period for replacement of the machine.

written 8.4 years ago by teamques10 ★ 68k

•   modified 4.0 years ago

The data collected in running a machine, the cost of which is Rs. 60,000, are given below: -

Year	1	2	3	4	5
Resale Value (Rs.)	42,000	30,000	20,400	14,400	9,650
Cost of spares (Rs.)	4,000	4,270	4,880	5,700	6,800
Cost of Labour (Rs.)	14,000	16,000	18,000	21,000	25,000

Determine the optimum period for replacement of the machine. -

operation research

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written 8.4 years ago by teamques10 ★ 68k

Cost of machine ( C )= Rs. 60,000

Year	Resale value (S)	Purchase price resale value (C-S)	Cost of spares Cost of labour Total costs	Σ Costs Total costs (purchase price resale value + Σ costs)	Average annual cost
1	42000	18000	4000	14000	18000	18000	36000	36000
2	30000	30000	4270	16000	20270	38270	68270	34135
3	20400	39600	4880	18000	22880	61150	100750	33583.33
4	14400	45600	5700	21000	26700	87850	133450	33362.5
5	9650	50350	6800	25000	31800	119650	170000	34000

The machine should be replaced after 4 years of use.

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