Sarthaks APP
0 votes
in Statistics by (64.4k points)

The cost of a machine is Rs. 12000. The maintenance cost and resale value per year of the machine is given below.

When should the machine be replace

1 Answer

+1 vote
by (59.5k points)
selected by
Best answer

Here, purchase price ; P = Rs. 12000 

Let Ci be the maintenance cost during the year and Sn be the resale value. Then, Average annual cost is A(n) =\(\frac{T}{n}\)

Where T = (P – Sn) + ΣC ; and n = no. of years.

Here, Average annual cost A(n) is minimum for n = 3. 

∴ The optimal replacement age is 3 years, 

i. e., The machine should be replaced for every 3 years. 

Minimum annual average cost is Rs. 3600.

Sarthaks APP

Welcome to Sarthaks eConnect: A unique platform where students can interact with teachers/experts/students to get solutions to their queries. Students (upto class 10+2) preparing for All Government Exams, CBSE Board Exam, ICSE Board Exam, State Board Exam, JEE (Mains+Advance) and NEET can ask questions from any subject and get quick answers by subject teachers/ experts/mentors/students.