Compare group replacement with individual replacement

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A multipurpose stadium in "Music City" has about 400 light bulbs.

Problem 1: Each light bulb costs $150. Based on historical data, it has been established the failure pattern is as below. 40 bulbs fail at 3000 hours. 60 bulbs fail at 4500 hours. The remaining 300 bulbs fail at 6000 hours. Cost to replace a bulb is $100. If the bulbs are replaced as a group, it costs $60/bulb. On an average the stadium is lighted up for 1800 hours/ year for various events. Compare group replacement at 4000 hours with individual replacement using an interest rate of 11% per year.  (Round years to nearest whole number to determine factors - do not need to interpolate. If you use excel, also be sure to round years before calculating EAC.)

  • Hint: EAC for bulk replacement of a bulb = $122

Reference no: EM132662406

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