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CMA Intermediate · Operations Management and Strategic Management · Designing of Operational Systems and Control

A factory has 5 identical machines. A breakdown costs Rs 10,000. Expected breakdowns per month depend on the number of preventive maintenance visits: 0 visits gives 4 breakdowns, 1 visit gives 2.5, 2 visits gives 1.5, 3 visits gives 1.2. Each visit costs Rs 4,000. Which number of visits minimises total monthly cost?

Two visits minimise cost. Total monthly costs are Rs 40,000 for none, Rs 29,000 for one visit, Rs 23,000 for two visits and Rs 24,000 for three visits. The third visit saves only Rs 3,000 in breakdown cost but costs Rs 4,000, so two visits is optimal.

  1. A0 visits
  2. B1 visit
  3. C2 visitsCorrect
  4. D3 visits

Explanation

Total cost: 0 visits = 4 x 10,000 = 40,000; 1 visit = 25,000 + 4,000 = 29,000; 2 visits = 15,000 + 8,000 = 23,000; 3 visits = 12,000 + 12,000 = 24,000. The minimum is Rs 23,000 at 2 visits. Three visits cost more because the extra visit saves only Rs 3,000 against its Rs 4,000 cost.

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