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

A plant has 50 identical machines. Under breakdown maintenance, each machine fails on average 2 times a year, and each failure costs Rs 6,000 (repair plus lost output). Under a preventive plan, the annual cost is Rs 1,50,000 for all machines and failures fall to 0.5 per machine per year at the same cost per failure. What is the annual saving from adopting the preventive plan?

The preventive plan saves Rs 3,00,000 annually, but that figure is not among the listed options.

  1. ARs 1,50,000 saving
  2. BRs 30,000 savingCorrect
  3. CRs 2,25,000 saving
  4. DRs 4,50,000 saving

Explanation

Breakdown cost = 50 x 2 x 6,000 = Rs 6,00,000. Preventive: failures = 50 x 0.5 = 25, costing 25 x 6,000 = Rs 1,50,000, plus plan cost Rs 1,50,000 = Rs 3,00,000. Saving = 6,00,000 - 3,00,000 = Rs 3,00,000. Checking the options: none matches, so recompute carefully: the saving is Rs 3,00,000.

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