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

A plant at Pune has 100 identical machines. Under breakdown maintenance the expected number of breakdowns per month is 20, and each costs ₹3,000 to repair. Under a preventive maintenance policy, the expected breakdowns fall to 8 per month, each still costing ₹3,000, and the preventive maintenance costs ₹25,000 per month. What is the monthly saving from adopting preventive maintenance?

Monthly saving is ₹11,000. Breakdown policy costs 20 x ₹3,000 = ₹60,000. Preventive policy costs 8 x ₹3,000 = ₹24,000 in repairs plus ₹25,000 maintenance, totalling ₹49,000. The difference of ₹11,000 favours preventive maintenance.

  1. A₹11,000Correct
  2. B₹36,000
  3. C₹61,000
  4. DNone of these amounts: ₹25,000

Explanation

Breakdown cost now = 20 x 3,000 = ₹60,000. Under preventive: 8 x 3,000 = ₹24,000 plus ₹25,000 = ₹49,000. Saving = 60,000 - 49,000 = ₹11,000. The ₹36,000 option ignores the preventive cost (60,000 - 24,000).

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