Consider the Equipment Replacement Problem Presented in the Chapter

question 42

Multiple Choice

Consider the equipment replacement problem presented in the chapter. Recall that in the network model formulation of this problem a node represents a year when the equipment was purchased. An arc from node i to node j indicates that the equipment purchased in year i can be replaced at the beginning of year j. How could the network model below be modified to depict an equipment purchase in year 4 and operating costs only through the remainder of the planning window?

• A) Modify the cost on arc 4-5 to account for only operating costs.
• B) Add a second arc 4-5 to represent just the operating costs.
• C) Add a dummy node, 6, so that arc 4-6 represents just the operating costs.
• D) Add a dummy node, 6, so that arc 4-5 represents operating costs and 5-6 represents new equipment purchase.

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Definitions:

Raw Materials

Raw materials are the unprocessed or minimally processed resources used to produce goods, forming the basic input in manufacturing processes.

Gross Method

Gross method is an accounting practice where purchases are recorded at full cost without accounting for any purchase discounts potentially available.

Net Method

An accounting approach that records transactions after deducting any discounts, rather than recording them at their gross amount and including the discounts as a separate item.

Purchase Discounts

Price reductions given by suppliers to buyers as an incentive for early payment of their purchase invoices.