es, men, electric light bulhs er any other equipment galicincy failice or brea down, The deta el telacement de Followings are the situations, when the replacement of certain items needsto ) The old item has failed and does not work at all. ) The old item is expected to fail shortly. i) The old item has deteriorated and requires expensive maintainence, ‘it (iv) Abetter design of equipment has been developed due to improvement in technology, _ () When the existing staff gradually disappears due to deaths, retirements etc. i) In order to enter the competitive market. ement decision are basically financial decisions. In such decisions the cost of to be installed and the one being replaced; scrap value, useful life, returns evant aspects have to be considered. Further, the aspects of technology, avail of funds, govt. policy, tax structure, reaction of workers and consumer pref influence such decisions. So both cost and non-cost factors are significant in IRE MECHANISM OF ITEM m failure has a far wider meaning in business than what wo types of failure.Example 1. The maintenance: Purchase price is Rs. 7000 is given bel“apove table shows the minimum total ence taxi should be replaced atthe e ‘Zeample 7. A truck owner finds from h “ruck (whose purchase price is Rs, the resale price at the end of each by 10% of purchase price ofmoneyis ro. = 60,00, The average co table cs‘period for repla Should we change (CA. May, 1986)OPERATIONS ; onthe ery fh ye Yee Wenig fren hanes THAT DETERIORATES yon, ‘CHANGES inthe pet asts ofthe equipment for different years with ; “ all the years, and the original cost ofthe equiPmet THEORYal relcement aang, NH a Fae ee terre Gq = Cost of group replace Cy = cost of replacing an ‘Then from the above we get cw = 0ATION "hy LewENT THEORY REP Ny ~ No ot lls Beng replaced iy hn end = No.of bulbs in the beginning X peta otaturcwhich are subject t0 fail ‘Month End and {hecost of component replaced is Re 1. a) Assess which policy of replacement would be ev a is economical at eurrent ce * 010) + 60 x 0.05) = 102.5 02) + (210 x 0.20) + (480 x 0.05),& a 43 68 85 ; 5 981.99 ‘average numberof failure per ‘The cost of individual rp Nov, sins th replacement ants and the replacoment ofan ‘eat for diferent group replacements polisGi) With 60 staff members in services calculated as given below