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Question
The manager of Cheryl's hospital is determining how often to perform preventive maintenance. When the testing machine fails, it costs the company $15,000 in lost production. However, the cost of preventive maintenance is somewhat expensive. The cost of performing preventive maintenance is $3,000.
Weeks between Preventive Maintenance Average Number of Breakdowns between Preventive Maintenance
1 0.0392 0.1103 0.1314 0.1515 0.176
2. Suppose that the company has outsourced the preventive maintenance work. The cost of the preventive maintenance work is negotiable. With everything else being the same as provided above, what is the preventive maintenance cost that makes the manager indifferent between a two-week and a three-week preventive maintenance strategy? Assume that the preventive maintenance costs the same regardless of the weeks between preventive maintenance.
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