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Operations Management and Strategic Management · Economics of Maintenance and Spares Management

Economics of Preventive vs Breakdown Maintenance Costs

Updated 10 October 2026 · Fact-checked

Economics of maintenance compares the total cost of preventive maintenance (planned servicing cost plus residual breakdown cost) with the cost of waiting for breakdowns (repair cost plus lost production). You calculate total expected cost for each policy or service level and choose the lowest. The breakeven point is where both policies cost the same.

Understand Economics of Preventive vs Breakdown Maintenance

Every machine needs money spent on it. You can spend before it fails, which is preventive maintenance, or after it fails, which is breakdown maintenance. The economic question is simple: which policy gives the lowest total cost to the business?

Preventive maintenance has a visible cost: inspection, lubrication, planned servicing, labour and spare parts, plus planned downtime. Breakdown maintenance looks cheap because you spend nothing until failure. But the cost of a breakdown is large: repair cost, idle labour, lost contribution, delayed deliveries, rush spares and sometimes damage to other parts.

The two costs move in opposite directions. As you spend more on preventive maintenance, the number of breakdowns falls, so breakdown cost falls. As you spend less, breakdowns rise. The total maintenance cost is the sum of the two, and it is lowest at some middle level. That level is the optimum maintenance level.

In exam questions this appears in two forms. First, a two-policy comparison: work out the total annual cost of each policy and pick the cheaper one. Second, a table of preventive maintenance levels (for example, servicing every month, every two months, and so on) with the expected number of breakdowns at each level. You compute the total cost for each row and pick the minimum.

Remember that breakdown cost must include the loss of contribution from idle time, not only the repair bill. Many students lose marks by leaving it out.

Key rules to remember

Cost of breakdown maintenance
Breakdown cost = Number of breakdowns × (Repair cost per breakdown + Loss per breakdown)
Loss per breakdown = idle hours × (contribution or idle-time cost per hour), as the question gives.
Cost of preventive maintenance
Preventive cost = Number of services × Cost per service
Add any planned downtime loss if the question gives it.
Total maintenance cost
Total cost = Preventive maintenance cost + Expected breakdown cost
Compute this for each level or policy and choose the minimum.
Expected number of breakdowns
Expected breakdowns = Σ (breakdowns in a case × its probability)
Use when the question gives a probability distribution of breakdowns.
Breakeven number of breakdowns
Breakeven breakdowns = Annual preventive cost ÷ Cost per breakdown
Valid when preventive maintenance would eliminate breakdowns and the breakdown policy has only variable per-breakdown cost. Preventive maintenance is better above this number.

How to solve Economics of Preventive vs Breakdown Maintenance questions

Use this method for any question comparing maintenance policies or finding the optimum level.

  1. 1Read the question and list each policy or maintenance level in a table.
  2. 2For each, find the cost of maintenance activity: number of services × cost per service, or the fixed annual amount given.
  3. 3Find the expected number of breakdowns. If probabilities are given, multiply and add.
  4. 4Find the cost per breakdown: repair cost plus idle-time or lost contribution cost. Check units (hours, months, per year).
  5. 5Compute breakdown cost = expected breakdowns × cost per breakdown, for the same period as the preventive cost.
  6. 6Add preventive and breakdown cost to get total cost for each option.
  7. 7Choose the lowest total cost and state the policy or level clearly, with the saving over the next best option.
  8. 8If asked, compute the breakeven number of breakdowns and compare it with the expected number.

Quickest way: Single table, minimum total

When to use it: Use when the question gives several service levels with expected breakdowns, and you have limited time.

  1. Fix the time period first, usually one year, and convert everything to it.
  2. Compute the cost per breakdown once, including lost contribution.
  3. Draw columns: Option, Preventive cost, Breakdowns, Breakdown cost, Total.
  4. Fill each row using the same two multiplications.
  5. Tick the lowest total and write one line of conclusion.

Common mistakes in Economics of Preventive vs Breakdown Maintenance

  • Leaving out lost production or contribution from the cost of a breakdown.

    Students treat breakdown cost as only the repair bill.

    Fix: Always add idle time loss per breakdown whenever the question gives hours lost or contribution per hour.

  • Comparing costs for different periods, such as monthly preventive cost against annual breakdown cost.

    Data is given in mixed units and students rush.

    Fix: Convert everything to one year before building the table.

  • Assuming preventive maintenance removes all breakdowns.

    Students ignore the residual breakdowns the question lists.

    Fix: Use the breakdown figure given for each level, and add its cost to the preventive cost.

  • Choosing the level with the fewest breakdowns.

    Students forget that more servicing costs more.

    Fix: Choose the level with the lowest total cost, not the lowest breakdown count.

  • Not weighting breakdowns by probability.

    Students take the most likely value instead of the expected value.

    Fix: Compute Σ (number × probability) before costing.

  • Giving a number with no conclusion.

    Students stop after calculating.

    Fix: End with a line naming the recommended policy and the annual saving.

Worked examples

Example 1

A machine has breakdown maintenance as its policy. Expected breakdowns are 12 per year. Each breakdown costs ₹4,000 in repairs and causes 10 idle hours at a lost contribution of ₹500 per hour. Preventive maintenance would cost ₹90,000 per year and reduce breakdowns to 3 per year (same cost per breakdown). Which policy is cheaper?

Show the solution
  1. Loss per breakdown = 10 × ₹500 = ₹5,000.
  2. Cost per breakdown = ₹4,000 + ₹5,000 = ₹9,000.
  3. Breakdown policy: 12 × ₹9,000 = ₹1,08,000.
  4. Preventive policy: breakdown cost = 3 × ₹9,000 = ₹27,000.
  5. Preventive total = ₹90,000 + ₹27,000 = ₹1,17,000.
  6. Compare: ₹1,08,000 is less than ₹1,17,000.

Answer: Breakdown maintenance is cheaper by ₹9,000 per year (₹1,08,000 against ₹1,17,000).

Example 2

A plant considers four service levels per year: 0, 2, 4 and 6 services. Cost per service is ₹6,000. Expected breakdowns: 0 services, 8 breakdowns; 2 services, 5 breakdowns; 4 services, 3 breakdowns; 6 services, 2 breakdowns. Cost per breakdown is ₹10,000 including lost production. Find the optimum number of services.

Show the solution
  1. 0 services: preventive ₹0; breakdown 8 × ₹10,000 = ₹80,000; total ₹80,000.
  2. 2 services: 2 × ₹6,000 = ₹12,000; breakdown 5 × ₹10,000 = ₹50,000; total ₹62,000.
  3. 4 services: 4 × ₹6,000 = ₹24,000; breakdown 3 × ₹10,000 = ₹30,000; total ₹54,000.
  4. 6 services: 6 × ₹6,000 = ₹36,000; breakdown 2 × ₹10,000 = ₹20,000; total ₹56,000.
  5. Lowest total is ₹54,000 at 4 services.

Answer: The optimum policy is 4 services per year, with a total cost of ₹54,000.

Exam tips

  • Always show a table with preventive cost, breakdown cost and total. Step marks are given for it.
  • Read the question for idle hours and contribution per hour. They are the hidden part of breakdown cost.
  • Check that all figures are for the same period before you multiply.
  • In MCQs, test the options by computing total cost for just the two closest choices.
  • Close with a one-line recommendation and the saving.

Practice questions from Economics of Maintenance and Spares Management

Economics of Preventive vs Breakdown Maintenance: frequently asked questions

Is preventive maintenance always cheaper than breakdown maintenance?

No. It is cheaper only when the savings in breakdown costs exceed the cost of the planned servicing. For low-cost, non-critical equipment, breakdown maintenance can be the better economic choice.

How do you find the breakeven point for preventive maintenance?

Divide the annual preventive maintenance cost by the cost of one breakdown. If you expect more breakdowns than that figure, and preventive maintenance would remove them, preventive maintenance pays off.

What is the optimum maintenance level?

It is the level of preventive maintenance at which the sum of preventive cost and expected breakdown cost is lowest. Spending more or less than this raises total cost.

What costs go into a breakdown?

Include repair labour and materials, and the loss from idle machines and workers, such as lost contribution. Add any penalties or rush charges if the question gives them.