Individual versus Group Replacement

Individual Replacement Group Replacement

•Only failed items •All items after certain period

•High cost •Low cost

•Failure probability not needed •Failure probability needed

Problem 1:
An equipment contains 1000 resistors. When a resistor fails
it is replaced. The cost of replacing a resistor individually is
$ 1. If all the resistors are replaced at the same time the
cost / resistor is reduced by 65 cents. The probability of
surviving at the end of the month is given below. What is
the optimum group replacement plan?

Month 0 1 2 3 4 5 6

Probability of surviving 1 0.94 0.8 0.6 0.2 0.1 0

Problem 2:
The cost of a batch reactor is $7100 and its scrap value is $100 at
the end of every year. The maintenance cost found from
experience are as follows:

Year 1 2 3 4 5 6 7 8
Maintenance 100 240 420 610 940 1200 1640 2100
Cost

When should the machine be replaced?

Problem 3:
An employer finds from this past experience that the cost/year of running
the chemical transportation truck whose purchase price is $70000 are
given below:

Year 1 2 3 4 5 6 7 8

Maintenance 10500 13000 15000 19000 24000 29000 35000 41000

Depreciation 35000 47000 56500 62250 67000 67000 67000 67000

At what age the truck is to be replaced?

Problem 4:
A chemical manufacturing organization purchases a
special type of reactor for $8000. The maintenance
costs for the reactor are expected to be $400 in each
year for the first 3 years and increase annually as
follows 850, 1100, 1600, 2200, and 2650. Assume
the money is worth of 18% per year. There is no
resale value of the equipment. When should the
reactor be replaced?