Machine A cost Rs. 9000/-, Annual operating cost is Rs.200/- for the first year and then increases by Rs.2000/- every year. In the fourth year operating cost becomes Rs.6200/- Determine the best age at which the machine can be replaced Assume that the machine has no resale value when replaced. Solution Replace at Running Total Loss due to Total cost Average cost the end of cost running cost reselling per yr. 200 200 9000 9200 9200 2200 2400 9000 11400 5700 4200 6600 9000 15600 5200 6200 12800 9000 21800 5450 The machine can be replaced at the end of third year when the average yearly cost of owning & operating the machine is Rs. 5200. Problem- For a machine following data are given Year 1 2 3 4 5 6 7 Operating 20000 24000 28000 36000 46000 56000 68000 cost 60000 30000 15000 7500 3500 - - Resale value When the machine to be replaced? Replace the machine after 5 years because average annual cost is minimum at the end of 5th year. B.REPLACE WHEN THE PRESENT COST IS MINIMUM Present value=Original Value x Present Value factor (PVF) Problem Given below the date for two equipments. Find out which alternative you will select . Machine 1 Machine 11 Initial Cost 5000/- 7500/- Annual Operating Cost 500/- 900/-
Machine A cost Rs. 9000/-, Annual operating cost is Rs.200/- for the first year and then increases by Rs.2000/- every year. In the fourth year operating cost becomes Rs.6200/- Determine the best age at which the machine can be replaced Assume that the machine has no resale value when replaced. Solution Replace at Running Total Loss due to Total cost Average cost the end of cost running cost reselling per yr. 200 200 9000 9200 9200 2200 2400 9000 11400 5700 4200 6600 9000 15600 5200 6200 12800 9000 21800 5450 The machine can be replaced at the end of third year when the average yearly cost of owning & operating the machine is Rs. 5200. Problem- For a machine following data are given Year 1 2 3 4 5 6 7 Operating cost 20000 24000 28000 36000 46000 56000 68000 Resale value 60000 30000 15000 7500 3500 - - When the machine to be replaced? Replace the machine after 5 years because average annual cost is minimum at the end of 5th year. B.REPLACE WHEN THE PRESENT COST IS MINIMUM Present value=Original Value x Present Value factor (PVF) Problem Given below the date for two equipments. Find out which alternative you will select . Machine 1 Machine 11 Initial Cost 5000/- 7500/- Annual Operating Cost 500/- 900/-
hotel-engg-I-SEM.docx