Life Cycle Cost:

A reliability engineer must decide which of two components to use in the design of a new product. According to the supplier, component A has a unit cost of $225 and a Weibull failure distribution with a shape parameter of 1.7 and a characteristic life of 12 years. Component B has a unit cost of $245 and a constant failure rate of 0.11 failure per year according to the manufacturer's specifications. A failure of either component results primarily in the replacement of a comparable (same age) part. The average part cost of component A is $40, and that of component B is $35. In addition, if component A is selected, a special test unit must be purchased at a cost of $4300 to be used in identifying the failed part. The product will have a 10-yr design life, at the end of which component A has a salvage value of $60 and component B has a salvage value of $40. Operating costs and other support costs are the same for either component. If 100 units of the product are to be manufactured, determine which component to use in the design of the product by comparing the life cycle costs. Assume a 5 percent effective discount rate.

Refer to the image for the equation of Life cycle cost.

Life-cycle cost cu N +(Fo PA (i,ta) CoN) PA (i, ta)cr MITTF (8.3 PF (i, td)SN1 Fs PA (i, td)CSN where C unit acquisition cost N number of identical units to be procured Fo fixed cost of operating annual operating cost per unit Fs fixed support cost CS annual support cost per unit Cf cost per failure operating hours per year per unit td design life (in years) unit salvage value (a negative value is interpreted as a disposal cost