- 20 Marks
QTB – May 2015 – L1 – SB – Q4 – Operations Research
This question requires calculating the average machine life, replacement costs, and determining the best replacement strategy for ATM machines in a bank.
Question
The management of a bank observed that the disruption of the bank ATM services was due to the age of the machines. Data on ATM failure is as follows:
| Year after replacement | 1 | 2 | 3 |
|---|---|---|---|
| Cumulative % of failures | 30% | 75% | 100% |
It was further observed that 1,000 units of these machines are in use nationwide and they can be replaced collectively for N5 million per machine. If replaced individually, they cost N30 million per machine.
You are required to calculate:
a.
i. Average machine life (2 Marks)
ii. Average number of replacements per year (2 Marks)
iii. Cost of individual replacement per year (2 Marks)
iv. Cost of mass replacement at the end of the year (12 Marks)
b. Determine the best replacement strategy (2 Marks)
Find Related Questions by Tags, levels, etc.
- Tags: ATM Services, Cost Analysis, Machine Life, Replacement Theory, Strategy
- Level: Level 1
- Topic: Operations Research
- Series: MAY 2015
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