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

For a machine, the cost of a breakdown is ₹8,000 and a preventive maintenance visit costs ₹2,000 per month. Preventive maintenance is economical only if it reduces the expected number of breakdowns per month by more than:

The reduction must exceed 0.25 breakdowns per month. Preventive maintenance costs ₹2,000, and each breakdown avoided saves ₹8,000, so break-even occurs when avoided breakdowns equal 2,000 divided by 8,000, which is 0.25.

  1. A0.25Correct
  2. B0.40
  3. C4.00
  4. D0.75

Explanation

Break-even reduction in breakdowns = preventive cost / cost per breakdown = 2,000 / 8,000 = 0.25 per month. Any reduction above this makes preventive maintenance cheaper. The 4.00 option inverts the ratio.

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