For a mainframe computer, a preventive maintenance inspection and repair cycle c
ID: 366850 • Letter: F
Question
For a mainframe computer, a preventive maintenance inspection and repair cycle costs a total of $2,000 on the average. If the computer breaks down, an average cost of $5,000 is incurred. The historical breakdown pattern for the computer is the following:
a) Recommend how often preventive maintenance should be performed.
b) For the above information, suppose that the average cost of a breakdown is unknown. What is the breakdown cost that would have the total cost of the 1-month PM cycle equal to the 2-month PM cycle?
Months Between PM Average Number of breakdowns between PM 1 0.2 2 0.6 3 1.8 4 3.6 5 7.0Explanation / Answer
a) Calculate average monthly cost of each preventive maintenance plan. This cost is calculated as below
Average monthly cost of PM plan = (Average number of breakdowns between PM * average cost of breakdown + PM cost ) / Months between PM
Average monthly cost of 1 month between PM plan = (0.2*5000 + 2000)/1 = 3000
Average monthly cost of 2 months between PM plan = (0.6*5000 + 2000)/2 = 2500
Average monthly cost of 3 months between PM plan = (1.8*5000 + 2000)/3 = 3667
Average monthly cost of 4 months between PM plan = (3.6*5000 + 2000)/4 = 5000
Average monthly cost of 5 months between PM plan = (7*5000 + 2000)/5 = 7400
2 months between PM plan has the minimum monthly cost.
Therefore, preventive maintenance should be performed every 2 months.
b) Let X be the average cost of breakdown.
Total cost of 1 month PM cycle = (0.2*X + 2000)/1 ---(1)
Total cost of 2 month PM cycle = (0.6*X + 2000)/2 ---(2)
Equating (1) and (2), we get
0.2X + 2000 = 0.6X/2 + 2000/2
or, X = 10000
Average breakdown cost = $ 10,000
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