written 7.8 years ago by
teamques10
★ 64k
|
• modified 3.4 years ago |
The cost of a machine is Rs. 6,100 and its scrap value is Rs. 100. The maintenance costs found from experience are as follows: -
| Year | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 |
|---|---|---|---|---|---|---|---|---|
| Maintenance cost | 100 | 250 | 400 | 600 | 900 | 1200 | 1600 | 2000 |
When should the machine be replaced? -
|
written 7.8 years ago by
teamques10
★ 64k
|
• modified 5.5 years ago |
Cost of machine C = Rs. 6100
| Year | Resale value (S) | Purchase price resale value (C-S) | Maintenance Cost | Σ Costs | Total costs (purchase price resale value + Σ costs) | Average annual cost |
|---|---|---|---|---|---|---|
| 1 | 100 | 6000 | 100 | 100 | 6100 | 6100 |
| 2 | 100 | 6000 | 250 | 350 | 6350 | 3175 |
| 3 | 100 | 6000 | 400 | 750 | 6750 | 2250 |
| 4 | 100 | 6000 | 600 | 1350 | 7350 | 1837.5 |
| 5 | 100 | 6000 | 900 | 2250 | 8250 | 1650 |
| 6 | 100 | 6000 | 1200 | 3450 | 9450 | 1575 |
| 7 | 100 | 6000 | 1600 | 5050 | 11050 | 1578.57 |
| 8 | 100 | 6000 | 2000 | 7050 | 13050 | 1631.25 |
The machine should be replaced after 6 years of use, since the average annual cost is least.
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