8 1813. (a) A transport manager finds from his past records that the costs per year of running a truck whose purchase price is Rs. 6,000 are as given below : 5 3 4 6 Year 1 2 7 : 1,000 1,200 1,400 Running cost (Rs.) : 1,800 2,300 2,800 3,400 4.000 Resale value (Rs.) 1,500 3,000 750 375 200 200 : 200 200 Determine at what age is replacement due? [IAS 1993; Kerala M.Com. 1991; Jodhpur M.Sc. (Math.) 1992 (b) Let the owner of a fleet have three trucks, two of which are two years old and the third one year old. The cost price, running cost and resale vale of these trucks are same as given in (a). Now he is considering a new type of truck with 50% more capacity than one of the old ones at a unit price of Rs. 8,000. He estimates that the running costs and resale price for the truck will be as follows : Year 1 2 3 4 S 6 7 8 Running costs (Rs.) : 1,200 1,500 1,800 2,400 3,100 4,000 5,000 6,100 Resale price (Rs.) 4,000 2,000 1,000 500 300 300 300 300 Assuming that the loss of flexibility due to fewer trucks is of no importance, and that he will continue to have sufficient work for three of the old trucks, what should his policy be? (Poona M.B.A. 1992)