Replacement Analysis

Replacement Analysis - Replacement Analysis ME 434 Han P....

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1 ME 434 Replacement Analysis 1 Replacement Analysis ME 434 Han P. Bao Department of Mechanical Engineering ME 434 Replacement Analysis 2 Two Key Measurements 1. Equivalent Uniform Annual Cost (EUAC) 2. Marginal Cost: Can be constant Constantly increasing Constantly decreasing Random change Year kept EUAC Min cost life
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2 ME 434 Replacement Analysis 3 Decision Map Identify parties For comparison Find EUAC Over given life Find lowest EUAC for defender Defender Marginal cost Defender Marginal Cost increase Defender Best challenger no Analysis technique 1 Compare next-year MC of defender with EUAC of challenger Available Not Available Analysis technique 2 Compare lowest EUAC of defender with EUAC of Challenger at its minimum cost life Analysis technique 3 Compare EUAC of defender over its remaining useful life with EUAC of challenger at its minimum cost life MC : Marginal Cost EUAC : equivalent Uniform Annual Cost ME 434 Replacement Analysis 4 Definitions • Obsolescence : when technology is outmoded; needs new technology • Depletion : gradual loss of market value as it is being consumed • Deterioration : loss in value due to aging process • Annual budget : used in monitoring of expenditures • Minimum cost life : number of years at which the EUAC of ownership is minimized • Marginal cost : year-by-year cost associated with keeping an asset.
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3 5 Example 1: to determine minimum cost life Machine costs $7500. No salvage value.Maintenance costs: $ 0 for1
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This note was uploaded on 10/26/2010 for the course ME 434W taught by Professor Bao during the Spring '10 term at Old Dominion.

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Replacement Analysis - Replacement Analysis ME 434 Han P....

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