C0tTFtTS

S. no Title Page no.

1 Topic oI the Project

2 Company ProIile

3 Introduction

4 Objective oI the Project

5 Methodology

6 Data collection and analysis

7 Suggestions/ Recommendations

8 Conclusion

9 ReIerences
C0HPAtY PR0FllF

..2an Institute of Manage2ent
ccman Institute oI
Management, Greater
Noida, NCR, is a B-
school Iounded by
Balibhadra Foundation
oI New Delhi. The
promoters oI the institute
are well
established,leading
practicing Chartered
ccountants, who have
recognized the need oI a
B-School where students
are shaped Ior global
responsibilities.
t present, ccman is successIully running its 2-yr Iull
time ICTE approved PGDM and PGDM-Retail program
which has been conceptualized with active participation Irom
industry proIessionals keeping in mind the projected
requirements oI talented management graduates in the
industry. More recently, it has started a new program PGDM-
Marketing which is also a ICTE approved program.

So2e More Infor2ation:
Members oI Governing Council-
1.ProI. run Singh, FC
Ex- Director- State Bank oI India & Union Bank oI India
2.ProI.(Dr.) Punjab Singh, Ph.D.
Ex. VC, Banaras Hindu University
3ur k8L MaLhur
lormer Lconomlc Advlsor
4rof 8u Slngh
Lx Chalrman nALCC
3Shrl !aspal 8ana
Ar[una Award adam Shree Award wlnner
6rof(ur) rlLam Slngh
Lx ulrecLor ManagemenL uevolopmenL lnsLlLuLe
Curgaon adam Shrl ln year 2003
7Mr vlnayak 8ahuguna
Mu AlLernaLe 8anklng SLandard CharLered 8ank
8Mr u narang
Croup ulrecLor uabur lndla LLd new uelhl
9Mr 1 k 8haumlk
Lconomlc Advlsor
10 Shrl Aseem Chawla
MemberLxecuLlve CommlLLee of lncome 1ax





So2e details of the Institute


ddress : 46/2, Knowledge Park - III , Greater Noida
201308
Distri.t : Gautam Buddha Nagar ( Uttar Pradesh )
Phone : 0120-2323800-02
Fax : 0120 2323805
Mobile : 9873076521/ 22
E2ail : Contact 1 , Contact 2
Website : Visit


Course(s) Offered by the Institution

Course 1
Na2e
-
Post Graduate Diplo2a in Manage2ent
(Marketing)

Eligibility : Graduates Irom any recognized
university/institution


Duration : 15 Month Full Time


d2ission : Selection will be on the basis oI
scores in National dmission Tests
(CT/MT/XT/TM) to be
Iollowed by Group Discussion and
Personal Interview

Course 2
Na2e
-
Post Graduate Diplo2a in Manage2ent
(P.G.D.M.)

Eligibility : Graduates Irom any recognized
university/institution


Duration : 2 year Iull time


dmission : Selection will be on the basis oI
scores in National dmission Tests
(CT/MT/XT/TM) to be
Iollowed by Group Discussion and
Personal Interview

Course 3.
Na2e
-
Post Graduate Diplo2a in Retail
Manage2ent (P.G.D.R.M)

Eligibility : Graduates Irom any recognized
university/institution


Duration : 2 year Iull time


d2ission : Selection will be on the basis oI
scores in National dmission Tests
(CT/MT/XT/TM) to be
Iollowed by Group Discussion and
Personal Interview
CMPUS & CDEMIC FCILITIES
CLSSROOMS & LECTURE HLLS
- Fully air-conditioned spacious classrooms are designed to
provide a proIessional environment Ior eIIective
interaction between teachers & students.
- ecture sessions are conducted with the help oI modern
teaching aids.
- The latest multimedia technology enables Iaculty
members to have interactive sessions oI teaching, which
adds conIidence and enthusiasm amongst the students.
- The Institution has classrooms meant Ior conducting
lectures, holding tutorials and Ior conducting Personality
Development Exercises.
- The capacities oI these classroom vary Irom 45 to 100.
- The School is equipped with suIIicient number oI
overhead and CD projectors, educational audio and
video cassettes, and other gadgets that are essential Ior a
modern B-school.

LIBRRY

ccman Institute oI Management has a well stocked library to
cater to the learning needs oI students and members oI Iaculty.
The students have access to the Iinest collection oI
contemporary books, newspapers, journals and magazines,
which supplement the prescribed textbooks and the reIerence
books. well-Iurnished and spacious reading room Iorms part
oI the library. The library subscribes to a large number oI
technical and research journals, and other periodicals to enable
the users keep abreast with the Irontiers oI knowledge in
respective disciplines. The working oI the library has been
computerized to Iacilitate eIIective use.

Hostel-:

The Institute oIIers excellent hostel Iacilities Ior both boys and
girls. The rooms are apartment type, set in an unique vibrating
environment whereby constant interaction oI students among
themselves occurs leading to community learning. The
students staying per room is restricted to two. The hostel has
Iacilities oI common room, indoor games, and gymnasium.
The hostel mess and eateries are managed by a mess
committee comprising oI students and the overall supervision
by a committee nominated by the management oI the
Institution.

CFETRI

The School has a caIeteria which serves meals and snacks to
students, staII and Iaculty at a very aIIordable rate.
COMPUTER LB

IT Infrastru.ture


ccman Institute oI Management provides state oI the art
hardware and soItware to cater to the computing needs oI
students and members oI Iaculty and hands-on-training needs
oI inIormation technology related subjects. The Institute has a
total oI 120 computers, with a dedicated server and UPS
systems, in a wi-Ii setting. The Pentium IV machines working
on Windows XP and inux platIorms have all the necessary
application soItware packages. Students at ccman Business
School have the additional Iacility oI campus wide high-speed
wi-Ii Internet connectivity.




.hieve2ent of the Institute on the S.ale of Ti2e Period:

2007: In the very Iirst year oI the placement 35 companies
visited the institute Ior the batch oI 60 students.

2008: Institute increases the seats oI PGDM Irom 60 to 120.

2009: Institute got the permission oI running PGDM-
Marketing course Irom the ll India Council oI Technical
Education merely 4 years aIter their establishment.

2010: Institute ranked 7
th
position in NCR region and 1
st

position in Greater Noida in a survey conducted by a
prestigious magazine Business Chronicle.











ltTR00uCTl0t

This is a live project prepared on the computer
replacement oI the ccman Institute oI Management`s
computer lab. This project gives the proper idea in which year
we should replace the computer system working in the
computer lab. Since by doing this we can cut loose the cost
and can increase the eIIiciency oI the computer system. s we
all know the eIIiciency oI the system deteriorates with time,
sometimes the system Iails completely and eIIect the whole
system. The maintenance cost oI the system also goes on
increasing with time. Thus it becomes more economical to
replace the old system with the new one. Hence there is a need
to Iormulate most economical replacement policy which is in
the best interest oI the system.

In this live project the machine that we replaced is
computer system installed in the computer lab oI ccman
Institute. We calculated the proper year in which the computer
system should be replaced by using the tool oI replacement
theory. This project prove to be oI great importance because
aIter this project we came to know practical aspects oI
replacement and how one can use it in his day to day liIe. The
project went through lot oI processes beIore coming to the
conclusion which has been described in great details in this
project.

0JFCTlvF0F THF PR0JFCT

The main objective oI the project is to maintain the
computer or replace it with new one iI necessary because
computer tends to wear out with time due to constant use. lso
more money needs to be spent on it on account oI increased
repair and operating cost.

In computer system there might be gradual or sudden
Iailure. Sudden Iailure i.e. that any oI its part may break down
due to negligence in handling which leads to replacement oI
that particular part. This replacement increases its maintenance
cost and so its average cost also increases and when the
average cost oI computer exceeds oI its previous year`s
maintenance cost it is better to replace the computer system.




HFTH000l06Y

INTRODUCTION: - The problem oI replacement is Ielt when
the job perIorming units such as men, machines, equipment ,parts etc.,
become less eIIective or useless due to either sudden or gradual
deterioration in their eIIiciency , Iailure or breakdown. By replacing
them with new ones at Irequent intervals, maintenance and other
overheads costs can be reduced. However, such replacements would
increase the need oI capital cost Ior new ones.

For example,
(i) In case oI highway tube lights where time oI Iailure is not
predictable Ior individual tubes, replacement is done only
aIter individual Iailure. However, it may be economical to
replace such tubes on a schedule basis beIore their Iailure.
Here the replacement decision may be taken to balance
wasted liIe oI a tube beIore Iailure and cost incurred when a
tube Iails completely during service.

(ii) vehicle tends to wear out with time due to constant use.
More money needs to be spent on it on account oI increased
repair and operating cost. stage comes when it becomes
uneconomical to maintain the vehicle and it is better to
replace it with a new one. Here the replacement decision may
be taken to balance the increasing maintenance cost with the
decreasing money value oI the vehicle as time passes



TYPES OF FILURE:-


In the project, we discuss the replacement policies in types oI
replacement situations:
(i) Items such as computers, whose eIIiciency deteriorates with
age due to constant use and which need increased operating
maintenance costs. In such cases deterioration level is
predictable and is represented by

a)increased maintenance/operational cost
b)its waste or scrap value and damage to item and saIety risk.

(ii) Items such as computer parts which do not give any indication
oI deterioration oI Iailure to speciIy the probability oI Iailure
Ior any Iuture time period. With this probability distribution
and the cost inIormation, it is desired to Iormulate optimal,
replacement policy to balance the wasted liIe oI an item
replaced beIore Iailure against the costs incurred when the
item Iailing service.
(iii) The existing working staII in an organization gradually
reduces due to retirement, deaths, retrenchment and other
reasons.
lallures
Sudden fallure
rogresslve
fallure
8eLrogresslve
fallures
Cradual fallure
8andom
fallures
REPCEMENT OF COMPUTERS WHOSE EFFICIENCY
DETERIORTES WITH TIME:-
For machine the maintenance cost always increase with time and stage
comes when the maintenance cost becomes so large that it is
economical to replace the machine with a new one. Thus the problem
oI replacement in this case is to Iind the best time (age oI machine) at
which the old machine should be replaced by the new one.
MODEL 1:-
Repla.e2ent poli.y for ite2s whose running .ost in.rease
with ti2e and value of 2oney re2ain .onstant during a
period.
1o llnd Lhe 8esL 8eplacemenL Age (1lme) of a Machlne When

(1) lLs malnLenance cosL ls glven by a funcLlon lncreaslng wlLh
Llme
(2) lLs scrap value ls consLanL and
(3) 1he Money value ls noL consldered

LeL C CosL of Machlne
S Scrap value of Lhe machlne aL Llme L
and C
m
(L) MalnLenance cosL of machlne aL Llme L

C
m
(L) lncreases wlLh L

Case 1 When t|me 't' |s a cont|nuous var|ab|e
1oLal malnLenance cosL of Lhe machlne ln n years
1he LoLal cosL of machlne ln n years
CosL of machlne Scrap value of machlne + 1oLal malnLenance
cosL ln n years



1he average cosL of malnLenance per year durlng n years ls glven by





now for A (n) Lo be mlnlmum



lrom (1)
le MalnLenance cosL of Lhe machlne aL Llme
L Average cosL of Lhe machlne per year



Pence Lhe average cosL of Lhe machlne per year ls mlnlmlzed by
replaclng lL when Lhe average cosL Lo daLe becomes equal Lo Lhe
currenL malnLenance cosL


/9 9 $
3
2

+ =
0
) (
) 1 ...( .......... .......... ) (
1
) (
) (
) (
0
0

=
+
=
3
2
3
2
/9 9
3 3
$
3
3
/9 9 $
3

) (
) (
) (
) (
1
) (
1
) (
0
0
2 2
3
3
/9 9 $
9
9
3
/9 9
3 3
$
3
/3
/
3
2
2
2
3
2
=
+
=
+

> +

=
3
2
/9 9
3 3
$
/3
3 /
0
3 3 2
2
0 ) (
2 ) ( 2 ) (

Case 2 When t|me 't' |s a d|screte var|ab|e
When Llme L Lakes Lhe values 1 2 3eLc Lhen Lhe LoLal
malnLenance cosL of Lhe machlne ln n years


1herefore ln Lhls case Lhe average cosL of Lhe machlne per year
durlng n years ls glven by



8uL A(n) ls mlnlmum for LhaL value of n for whlch
(An 1) 0 A (n)(3)
A(n) A(n + 1) A(n)




) (
1
1
) (
1
1
1
) 1 (
) (
1
1
9
3
9
3 3 3 3
$
2
3
2
2 +
=

+
+

'
+

'

+
+
+

=


) (
1
1
) 1 (
) ( ) (
1
1
9
3 3 3
9 $
3
3
2
2
+
=
+
+

+
+
=

=
=
3
2
2
9
1
) (

+
+
+

=

=
+
=
3
2
2
3
2
2
9
3 3
$
9
3 3
$
1
1
1
) (
1
) (
1
1
1

=
=
+

=
+
=
3
2
2
3
2
2
9
3 3
$
3
9 $
3
1
1
) 2 ( )......... (
1
) (
) (

) (
1 ) 1 (
) 1 (
) 2 ...( ) (
1
1
1
) (
1
9
3 3
3
3
1742 9
3 3
3
3
3
+

=
+
+
+
=
+

lrom (2) A(n) ls mlnlmum for value of n for whlch
A(n) 0 and A(n 1) 0
le
and
or
and
lrom (4) we conclude LhaL

1uo noL replace lf Lhe nexL years malnLenance cosL ls less Lhan
Lhe prevlous years average LoLal cosL

28eplace lf Lhe nexL years malnLenance cosL ls greaLer Lhan Lhe
prevlous years average LoLal cosL

A Machlne ls conLlnued up Lo Lhe Llme Lhe average cosL per year
(lncludlng cosL of Lhe new machlne malnLenance cosL eLc) of Lhe
machlne decrease and ls replaced aL Lhe Llme when lLs cosL beglns Lo
lncrease



) 1 ( ) (
) ( ) (
0 ) (
1 ) 1 (
0 ) (
1
1
1
) (
1
1

>
+

>
+
+
+

+
+
3 9
3 9
9
3 3
3
9
3 3
3
3
3
3
3
ata co||ect|on and ana|ys|s
We have collecLed Lhe daLa
1oLal number of sysLem 60 [ 8s18000 per sysLem
urchased on 30
Lh
!uly 2006
SysLem ConflguraLlon C81 MonlLor 13''
8AM
Pard dlsk
uvu
MoLher board
keyboard
Mouse
Labor cost
1wo CompuLer ALLendanL wlLh salary 8s4000 each
1wo Lab AsslsLanL wlLh salary 8s 6000 each
1oLal Labor cosL of year
(4000L2+6000L2) L 12
8s 2 40000
@ota| e|ectr|c|ty cost |n one year
Cne sysLem consumes 230W elecLrlclLy
1 unlL elecLrlclLy cosL ls 8s 369
SysLem uses for 8 hrs dally
1oLal no of sysLem 60

1000
60 69 . 3 365 8 250 L L L L
=

161622 . #8 =
@ota| cost of system 18000L60
8s 10 80000
And here we have assumed Lhe upgradaLlon cosL afLer !uly
2009 And we have Laken a year from Lhe monLh !uly Lo
monLh !une of nexL year
esa|e va|ue
Pere we Lake depreclaLlon [ 60
Ior year 200607
10 80000 L

100
60
6 48000
10 80000 6 48000 4 32000
Ior year 200708
4 32000
L

100
60
2 39200
4 32000 2 39200 1 72800


Ior year 200809

1 72800 L

100
60
1 03680
1 72800 1 03680 69120
Ior year 200910
69120
L

100
60
41472
69120 41472 27648
Ior year 201011
27648
L

100
60
16389
27648 16389 9933
Ior year 201112
9933
L

100
60
3972
9933 3972 3981





@ota| Ma|ntenance cost
ear 200607 200708 200809 200910 201011 201112
Labor cosL 240000 240000 240000 240000 240000 240000
LlecLrlclLy
cosL
161622 161622 161622 161622 161622 161622
Wear/Lear
upgrada
Llon cosL
1000 4000 10000 18000 23000 32000
1oLal cosL 402622 403622 411622 419622 426622 433622

Ca|cu|at|ons of Average unn|ng Cost for System
?ear
Cf
Servlce
(n)
8unnlng
CosL
(8s)

CumulaLlve
8unnlng
CosL
(8s)

8esale
value
(8s)

CS
1oLal
CosL
(8s)

1C
Average
CosL
(8s)

A1C
n

200607 402622 402622 432000 834622 834622
200708 403622 808244 172800 981044 490322
200809 411622 1219866 69120 1288986 429662
200910 419622 1639488 27648 1667136 416784
*201011 426622 2066110 99S3 2076063 41S212
201112 433622 2499732 3981 2303713 417283



) (3
2
) (3
2
1he calculaLlons ln Lable show LhaL Lhe average cosL ls lowesL
durlng Lhe 201011 year Pence Lhe machlne should be
replaced afLer every flfLh year oLherwlse Lhe average cosL per
year for runnlng Lhe machlne would sLarL lncreaslng
















ecommendat|ons
1hrough calculaLlons we came Lo Lhe concluslon LhaL Lhe
sysLem should be replaced afLer flve years We could do Lhe
replacemenL wlLh Lhe same old conflguraLlon buL lf we use a
new conflguraLlon sysLem we could even lncrease Lhe
replacemenL year wlLh low malnLenance cosL
1he new conflguraLlon sysLem whlch we can use ln place
of Lhe old conflguraLlon sysLem ls as follows
1l1 monlLor 13''
2C8 8AM
160 C8 Pard dlsk
uvu 8CM
lnLer orlglnal MoLher board
MulLlmedla keyboard
CpLlcal Mouse
Cost per system s 20000 approx
Pere we assume Lhe same labor cosL
L|ectr|c|ty
Cne sysLem consumes 130W and runs for 8 hr ln a day
wlLh elecLrlclLy cosL 8s 369 per unlL


1oLal no of SysLem 60
1herefore 1oLal elecLrlclLy cosL

1000
60 69 . 3 365 8 150 L L L L
=

8s 96973
1oLal CosL of 60 SysLem 20000 L
60 8s1200000

esa|e Va|ue
Ior year 1
1200000 L

100
60
720000
1200000 720000 8s 480000
Ior year 2
480000
L

100
60
288000
480000 288000 8s 192000
Ior year 3
192000
L

100
60
113200
192000 113000 8s 76800
Ior year 4
76800 L

100
60
46080
76800 46080 8s 30720
Ior year S
30720
L
100
60
18432
30720 18432 8s 12288
Ior year 6
12288
L

100
60
7373
12288 7373 8s 4913
Ior year 7
4913
L

100
60
2949
4913 2949 8s 1966
Ior year 8
1966
L

100
60
1180
1966 1180 8s 786





now
@ota| Ma|ntenance cost
ear
1 2 3 4 S 6 7 8
Labor cosL
240000 240000 240000 240000 240000

240000 240000 240000
LlecLrlclLy
cosL
96973 96973 96973 96973 96973 96973 96973 96973
Wear/Lear
upgrada
Llon cosL
300 1000 2000 2300 3000 3300 4000 3000
1oLal cosL
337473 337973 338973 339473 339973 340473 340973 341973


Ca|cu|at|ons of Average unn|ng Cost for new mach|ne
?ear
Cf
Servlce
(n)
8unnlng
CosL
(8s)

CumulaLlve
8unnlng CosL
(8s)

8esale
value
(8s)
CS
1oLal
CosL
(8s)
1C
Average
CosL
(8s)
A1C
n

1 337473 337473 480000 817473 817473
2 337973 673446 192000 867446 433723
3 338973 1014419 76800 1091219 363740
4 339473 1333892 30720 1384612 346133
3 339973 1693863 12288 1706133 341231
6 340473 2034338 4913 2039233 339873
*7 340973 237S311 1966 2377277 339611
8 341973 2717284 786 2718070 339739

) (3
2
) (3
2
1he calculaLlons ln Lable show LhaL Lhe average cosL ls lowesL
durlng Lhe sevenLh year Pence Lhe machlne should be replaced
afLer every sevenLh year oLherwlse Lhe average cosL per year for
runnlng Lhe machlne wlll sLarL lncreaslng So new conflguraLlon ls
beLLer Lhan Lhe old conflguraLlon and lLs malnLenance cosL ls
leasL raLher Lhan old sysLem's malnLenance cosL

Conc|us|on
lrom Lhls pro[ecL we came Lo Lhe concluslon LhaL afLer a
cerLaln perlod of Llme each and every machlne deLerloraLes
and lL needs Lo be replaced by Lhe new one for mlnlmlzlng
Lhe malnLenance cosL
lor Lhls purpose 8eplacemenL 1heory proves
Lo be Lhe besL ManagemenL Sclence 1ool