CMA Intermediate · Operations Management and Strategic Management · Economics of Maintenance and Spares Management
A machine under breakdown maintenance has an expected 4 breakdowns per month, each costing Rs 5,000. A preventive maintenance programme costing Rs 9,000 per month would cut breakdowns to 1.5 per month. What is the net monthly benefit of the preventive programme?
The net monthly benefit is Rs 3,500. Breakdown cost falls from Rs 20,000 to Rs 7,500, a gain of Rs 12,500, but the programme costs Rs 9,000, leaving a net gain of Rs 3,500.
- ARs 3,500Correct
- BRs 12,500
- CRs 9,000
- DRs 20,000
Explanation
Breakdown cost now = 4 x 5,000 = Rs 20,000. With preventive: 1.5 x 5,000 = Rs 7,500 plus Rs 9,000 = Rs 16,500. Net benefit = 20,000 - 16,500 = Rs 3,500. Rs 12,500 ignores the programme cost.
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