b) What is the cost of the current maintenance policy? The fire department has a
ID: 377230 • Letter: B
Question
b) What is the cost of the current maintenance policy?
The fire department has a number of failures with its oxygen masks and is evaluating the possibility of outsourcing preventive maintenance to the manufacturer. Because of the risk associated with a failure, the cost of each failure is estimated at $2,000. The current maintenance policy (with station employees performing maintenance) has yielded the following history: Number of breakdowns Number of years in which breakdowns occurred O 1 2 3 4 5 3 3 1 4 8 1 a) The expected number of breakdowns per year with station employees performing maintenance = breakdowns per year (round your response to two decimal places).Explanation / Answer
From the given data :
Number of breakdown which happened in year 1 = 2 + 5 = 7
Number of breakdown which happened in year 3 = 0 + 1 = 1
Number of breakdown which happened in year 4 = 3
Number of breakdiwn which happened in year 8 = 4
Thus total number of breakdowns which happened in 8 years = 7 + 1 + 3 + 4 = 15
Thus expected number of breakdown per year = 15/8 = 1.88
Annual cost of current maintenance policy
= Cost of each breakdown x Expected number of breakdown each year
= $2000 x 1.88
= $3760
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