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Individual Vs Group Replacement

The document discusses three problems related to replacement decisions: 1) A light bulb replacement problem where the failure rate each month is given and the costs of individual vs group replacement are provided to determine the optimal interval for group replacement. 2) A machine replacement problem where annual maintenance costs and resale values over 8 years are given to determine the optimal replacement age. 3) A truck replacement problem where annual maintenance and depreciation costs over 8 years are provided to determine the optimal replacement age.

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Mahi Fatima
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14K views

Individual Vs Group Replacement

The document discusses three problems related to replacement decisions: 1) A light bulb replacement problem where the failure rate each month is given and the costs of individual vs group replacement are provided to determine the optimal interval for group replacement. 2) A machine replacement problem where annual maintenance costs and resale values over 8 years are given to determine the optimal replacement age. 3) A truck replacement problem where annual maintenance and depreciation costs over 8 years are provided to determine the optimal replacement age.

Uploaded by

Mahi Fatima
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Individual versus Group Replacement

Individual Replacement

Group Replacement

Only failed items


High cost
Failure probability not needed

All items after certain period


Low cost
Failure probability needed

Problem:
The following mortality rates have been observed for a special type
of a light bulb:
Month
Per cent failing at the end of the month

1
10

2
25

3
50

4
80

5
100

In an industrial unit, there are 1000 bulbs of a special type in use and it costs Rs. 10 to replace an
individual bulb that has burnt out. If all bulbs were replaced simultaneously, it would cost Rs. 2.5
per bulb. It is proposed to replace all bulbs at fixed intervals, whether or not they have burnt out,
and to continue replacing burnt-out bulbs as they fail. At what intervals of time, the manager
should replace all the bulbs?

Problem:
An employer finds from his past experience records that the cost of the
machine is Rs 6000/- and the running costs are given below. At what age
the replacement is due?
Year
Maintenanc
e Cost
Resale
Value

1
1000

2
1200

3
1400

4
1800

5
2300

6
2800

7
3400

8
4000

3000

1500

750

375

200

200

200

200

Problem:
An employer owner finds from this past experience that the
cost/year of running the truck whose purchase price is $60000
are given below:
Year
Maintenanc
e
Depreciatio
n

1
10000

2
12000

3
14000

4
18000

5
23000

6
28000

7
34000

8
40000

30000

45000

52500

56250

58000

58000

58000

58000

At what age the truck is to be replaced?

Internal versus External Maintenance


Internal Maintenance
Maintenance Department
External Maintenance
Lack of sufficient capacity
Execution of task at greater cost
Contract with an external company

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