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

A machine at Kaveri Plastics breaks down on average 4 times a month under breakdown maintenance, with each breakdown costing ₹6,000 in repair and lost output. A preventive programme costing ₹10,000 per month would cut breakdowns to 1 per month at the same cost per breakdown. What is the monthly saving or loss from adopting the preventive programme?

The programme saves ₹8,000 per month. Breakdown maintenance costs 4 × ₹6,000 = ₹24,000, while the preventive option costs one breakdown of ₹6,000 plus ₹10,000 for the programme, totalling ₹16,000. The difference is ₹8,000 in favour of preventive maintenance.

  1. ASaving of ₹8,000Correct
  2. BSaving of ₹18,000
  3. CLoss of ₹4,000
  4. DSaving of ₹2,000

Explanation

Current cost = 4 × 6,000 = ₹24,000. Under preventive: 1 × 6,000 + 10,000 = ₹16,000. Saving = 24,000 − 16,000 = ₹8,000. Option of ₹18,000 ignores the programme cost on the saved breakdowns' cost only partly (3×6,000).

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