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Q. 9.1. What is replacement problem?

Ans The replacement problems are concerned with the situations that arise when some time such
as machmes, equipments and electric bulbs etc need replacement due to decreased efficiency,
failure or breakdown.
The problem of replacement is to decide best policy to determine an age at which
the replacement is more economical instead of continuing at increased cost.

Q. 9.2. What are the situations, which makes the replacement of items necessary?
Ans. 1. The old item has become in worse condition and work badly.
2. The old item has failed due to accident.
3. A better or efficient design of machine has come in market.

Q. 9.3. Explain money value, present value and discount rate.

Ans. Money Value : Money has a value over time. We often speak; Money is worth 10% per
year spending Rs. 100 today would be equivalent to spending Rs. 110 at the end of one year. In,
other words if we spend Rs. 110 after a year from now, we could equivalently spend Rs. 100
today which would be of worth Rs. 110 next year.
Present Worth FactorIf i is the interest rate then (1 +i) is called the present
worth factor. In other wards Present value of one rupee spends in n years time ftom now
Discount rate The present worth factor of unit amount to be spent after one year is given by V =
(1 + r) where i is interest rate and V is called discount rate or depreciation value.

Q. 9.4. Discuss the brief replacement procedure for the items that deteriorate with time.
Ans. When ignoring the changes in the value of money-The item should be replaced when the
average annual cost to date becomes equal to the current maintenance cost.
When considering the changes in the value of money-

(a) The machine should be replaced if the next periods cost is greater than the weighted average
of previous cost.
(b) The machine should not be replaced if the next periods cost is less than the weighted average
of previous costs.

Q. 9.5. Briefly explain Individual and Group replacement.

Ans. Group replacement is concerned with those items that either work or fail completely. It
often happens that a system contains a large no. of identical low cost items that are increasingly
liable to failure with age When the value of individual items is so small that cost of keeping
records of individual ages cannot be justified. It may be advantageous to replace all items at
fixed intervals. Such a policy is called Group replacement.
Individual replacement: Under this policy an item is replaced immediately after
its failure
Group replacement: Under this policy, decision is taken as to when all the items
must be replaced irrespective of the fact that the item has failed or have not failed,
with the provision of that an item fails before optimal time, it may be replaced individually

Q. 9.6. What is the advantages of preventive replacement over routine replacement?

Ans. Advantages of Preventive Replacement Over Routine Replacement: Routine
replacement means carrying out minor replacement jobs at regular intervals. It involves minor
jobs such as lubrication, minor adjustment of pressure and tightening of loose parts etc.
Preventive maintenance is the planned maintenance of plants and equipments in
order to prevent or minimize breakdowns and depreciation rates. PM incudes all types
of jobs like
(a) Major jobs like overhauling and reconditioning etc.
(b) Replacement of consumables like gaskets, belts, seal, bearings etc.
.. . .
(c) Internal cleaning of equipments, lubrication and oil changing.

Q. 9.7. What is the difference between age maintenance and preventive maintenance?

Ans. Age replacement is a subset of preventive maintenance.

Age Replacement: It is the replacement of item at fixed interval (as per its technical
characteristics) irrespective to its condition at that time.
Condition basedMaintenance : It is based on the fact that whenever any failure is to occur it
gives some types of waining. CBM is the use of advanced technology to sense machinery
operating characteristics such as vibration, temp., pressure etc. and to compare the measured
values of these characteristics with historical data as per established criteria to assess machinery
condition. CBM permit conditiOn based rather than age based initiation of maintenance efforts to
correct the any problem identified


Type A Replacement of items whose Maintenance and repair cost increase with time, ignoring
changes in the value of money during the period
Problem 9.8. The cost of a machine is Rs. 6100/- and its scrap The maintenance costs found
from experience are as follows:
value is Rs. 100/-.

The avg. annual cost is minimum Rs. should be replaced after 6 years of use.
(1575/-) during the sixth year. Hence the m/c

Problem. 9.9. A machine owner finds from his past records that the costs per year of
maintaining a machine whose purchase price is Ks. 6000 are as given below

Determine at what age is a replacement due?

Ans. Capital cost C = 6000/-. Let it be profitable to replace the. machine after n
years. Then n should be determined by the minimum value of Tav

We observe from the table that avg. annual cost is minimum (Rs. 2700/-). Hence the m/c should
replace at the end of 5th year.
Type B. Replacement of items whose maintenance costs increase with time and
value of money also changes with time.
The machine should be replaced if the next periods cost is greater than weighted average of
previous cost.
Discount rate [Present worth factor (PWF)

Problem. 9.10. A machine costs Rs. 500/ Operation and Maintenance cost are zero for the
first year and increase by Rs. 100/ every year. If money. is worth 5% every year,
determine the best age at which the machine should be replaced. The resale value of the
machine is negligible small. What is the weighted average cost of owning and operating the

M/c su1d be replaced

at the end of 3C1 year.

Problem 9.11. Purchase price of a machine is Rs. 3000/ and its running cost is given in
the table below. If should be replaced. the discount rate is 0.90. Find at what age the

Ans. V (Discount rate) = 0.90

M/c should be replaced at the end of 5th year.

Type C. Replacement of items that fail suddenly.

Problem 9.12. The following mortality ratio have been observed for a certain type
of light bulbs in an installation with 1000 bulbs

There are a large no. of such bulbs which are to be kept in working order. If a bulb fails in
service, it cost Rs. 3 to replace but if all the bulbs all replaced in the same operation it can
be done for only Rs. 0.70/ a bulb. It is proposed to replace all bulbs at fixed intervals,
whether or not they have burnt out and continue replacing burnt out bulb as they fail.
(a) What is the best interval between group replacement?
(b) Also establish if the policy, as determined by you is superior to the policy of replacing
bulbs as and when they, fail, there being nothing like group replacement.
(c) At what group replacement price per bulb, would a policy of strictly individual
replacement become preferable to the adopted policy?
Solution : Let p. be the probability that a new light bulbs fail during the 1th wek of the life.