Comparing the Costs of Preventive Maintenance and Breakdown Maintenance The frequency of breakdown of a machine per month is shown in the table. The cost of a breakdown is $1,000 and the cost of preventive maintenance is $1,250 per month. If preventive maintenance is performed, the probability of a

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Comparing the Costs of Preventive Maintenance and Breakdown Maintenance

The frequency of breakdown of a machine per month is shown in the table. The cost of a breakdown is $1,000 and the cost of preventive maintenance is $1,250 per month. If preventive maintenance is performed, the probability of a machine breakdown is negligible. Should the manager use preventive maintenance, or would it be cheaper to repair the machine when it breaks down?

Number of breakdowns	0	1	2	3
Frequency of occurrence	.20	.30	.40	.10

Accepted Answer

The expected number of breakdowns without preventive maintenance is 1.40:

Number of Breakdowns	×	Frequency of Occurrence	=	Expected Number of Breakdowns
0		.20		0
1		.30		.30
2		.40		.80
3		[latex]\frac{.10}{1.00}[/latex]		[latex]\frac{.30}{1.40}[/latex]

Expected cost using repair policy is 1.40 breakdowns/month × $1,000/breakdown = $1,400. Preventive maintenance would cost $1,250.

Therefore, preventive maintenance would yield a savings of $150/month.

Question 14S.1: Comparing the Costs of Preventive Maintenance and Breakdown ...

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