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CMA Intermediate · Operations Management and Strategic Management

Economics of Maintenance and Spares Management for CMA Inter

This chapter teaches you how to keep plant running at the lowest total cost. You compare breakdown and preventive maintenance by adding repair cost and lost production, decide when to replace an asset using average annual cost = (purchase cost - salvage value + total maintenance and running cost over the years) ÷ number of years, and control spares by usage, criticality and lead time.

What this chapter covers

This chapter in Paper 9 deals with a plain question: how much should a business spend to keep its machines working, and when is it cheaper to stop repairing and replace? It starts with the types of maintenance, then moves to cost comparisons, replacement decisions and finally the stock of spare parts that makes maintenance possible.

Most of the chapter is decision-making with costs. You compare alternatives, pick the one with the lowest total cost and justify it. The numerical part is usually short and uses simple arithmetic: expected breakdowns, cost per breakdown, cost of a maintenance programme, and average annual cost over the life of an asset. The theory part asks you to define, classify and explain.

The chapter links to the rest of the paper. Maintenance is a core part of operations management, so it connects with production planning, capacity, quality and productivity. Spares management borrows ideas from inventory control, such as ordering cost, carrying cost, lead time and classification of items. The cost logic also supports the strategic side of the paper, where make, buy and invest choices are judged on total cost and risk.

This chapter is worth your effort because it mixes easy theory with short, scoring numericals. A student who can classify maintenance types, set out a clean cost comparison and give a reasoned recommendation can pick up step marks even if the final figure is off. It also gives you good material for the MCQ section, since definitions, distinctions and simple cost comparisons are easy to test in a single question. The ideas are practical, so they stay in your memory once you understand the logic behind them.

Economics of Maintenance and Spares Management: topics in the order to study them

  1. 1Types of MaintenanceStart here because every later cost comparison uses these terms, and the definitions are the base for MCQs and short notes.
  2. 2Economics of Preventive vs Breakdown MaintenanceOnce you know the types, learn how to cost them side by side; this is the main numerical skill of the chapter.
  3. 3Maintenance Cost and Replacement DecisionsThis builds on cost comparison and adds the time dimension, so you need the earlier cost logic first.
  4. 4Spares Management and Inventory of SparesStudy this last because it applies inventory ideas to spare parts and ties together maintenance policy and stock levels.

How to prepare Economics of Maintenance and Spares Management

Prepare this chapter as a mix of clear definitions and a few repeatable cost layouts. Aim to understand the decision logic rather than memorise figures.

  1. Read the types of maintenance and write one line for each: what it is, when it is used, and one example from a plant or office.
  2. Make a two-column comparison of preventive and breakdown maintenance covering cost, downtime, planning and risk, so you can answer distinction questions quickly.
  3. Practise the cost comparison layout: list each cost item, total each option, then state the cheaper option in a closing sentence.
  4. For replacement, practise computing average annual cost for each year of life, including capital cost less resale value, find the lowest, and say what it means for the replacement age.
  5. For spares, link each point to inventory ideas: usage rate, criticality, lead time, and the cost of stock-out versus the cost of holding stock.
  6. Solve a few past-style numericals under time, writing the working in steps so that partial marks are protected.
  7. Finish with a few MCQs on definitions and distinctions, and review every option you got wrong.

Common mistakes in Economics of Maintenance and Spares Management

  • Comparing only repair cost and ignoring lost production

    Fix: Add the cost of downtime or lost contribution to each breakdown, and say so in your working.

  • Giving the answer as a figure without a recommendation

    Fix: End with one sentence naming the cheaper option and the saving, because ICMAI expects interpretation.

  • Mixing up preventive and predictive maintenance

    Fix: Remember that preventive follows a fixed schedule, while predictive acts on the measured condition of the equipment.

  • Choosing the replacement year from the lowest yearly cost instead of the lowest average annual cost

    Fix: Compute the average annual cost for each year of life as (capital cost - resale value + cumulative running costs) ÷ years. Find where it is lowest, and replace at the end of the year after which the next year's running cost exceeds that minimum average, i.e. when the average starts to rise.

  • Treating all spares alike

    Fix: Classify spares first by criticality, value and usage, then choose the control method for each class.

  • Writing long theory with no structure

    Fix: Use short headed points with one example each, so the examiner can see each mark point quickly.

Last-day revision: Economics of Maintenance and Spares Management

  • Breakdown maintenance means repair only after failure; it has low planning effort but can cause high downtime.
  • Preventive maintenance is done on a schedule to reduce the chance of failure.
  • Predictive maintenance uses condition monitoring to decide when to act.
  • Compare options on total cost: maintenance cost plus breakdown cost plus lost contribution.
  • Expected breakdown cost = expected number of breakdowns × cost per breakdown.
  • Include lost production or contribution, not only repair cost, in the breakdown cost.
  • Choose the option with the lowest total relevant cost, then write a one-line recommendation.
  • Average annual cost = (purchase cost - salvage value + total maintenance and running cost over the years) ÷ number of years.
  • Replace at the end of the year after which the next year's running cost exceeds the minimum average annual cost, i.e. when the average starts to rise.
  • Spares are classified by value, criticality and usage so that control effort goes where it matters.
  • A stock-out of a critical spare can stop production, so its holding cost is usually justified.
  • Spares stocking depends on lead time, usage rate and the cost of holding versus running out.

Economics of Maintenance and Spares Management practice questions

Economics of Maintenance and Spares Management in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Economics of Maintenance and Spares Management: frequently asked questions

Is this chapter more theory or numerical?

It is a mix. The types of maintenance and spares management are mostly theory, while preventive versus breakdown costs and replacement are short numericals. Prepare both so you can handle either in the MCQ section or the written questions.

How should I present a maintenance cost comparison?

List each cost item for each option, total them, and compare the totals. Include downtime or lost contribution. Close with a one-line recommendation that names the cheaper option.

How do I decide when to replace an asset?

Work out the average annual cost for each year of the asset's life: (purchase cost - resale value + cumulative running costs) ÷ years. Replace at the end of the year after which the next year's running cost exceeds the minimum average annual cost, that is, when the average starts to rise.

Are there negative marks for wrong MCQs in this chapter?

No. Neither the question papers nor the ICMAI prospectus provide for negative marking, so attempt every MCQ. Use elimination on definitions and distinctions to improve your chances.