000 Ost fort : Bd Example 17.5 A firm has a machine whose purchase price is Rs 1,00,000. Its running cost and resale price at the end of different years are as follows: Year 1 2 3 4 5 6 Running cost (Rs) : 7,500 8,500 10,000 12,500 17,500 27,500 Resale price (Rs) 85,000 76,500 70,000 60,000 40,000 15,000 (a) Obtain the economic life of the machine and the minimum average cost. (b) The firm has obtained a contract to supply the goods produced by the machine, for a period of five years from now. After this time period, the firm does not intend to use the machine. If the firm has a machine of this type that is one year old, what replacement policy should it adopt if it intends to replace the machine not more than once? urche