Suppose That for a Particular Piece of Machinery, the Frequency

question 26

Multiple Choice

Suppose that for a particular piece of machinery, the frequency distribution of monthly breakdowns is as follows: $$\begin{array} { c c } \text { Number of Breakdowns } & \text { Prob. } \\\hline 0 & 0.40 \\1 & 0.30 \\2 & 0.15 \\3 & 0.10 \\4 & 0.05\end{array}$$ The cost of a breakdown is $2,000, and the cost of a preventive maintenance program is $2,000 per month. If the preventive maintenance program is adopted, the probability of a machine breakdown is negligible. How much better off per month would the firm be if it adopted preventive maintenance?

• A) $100 worse off
• B) $200 worse off
• C) $100 better off
• D) $200 better off
• E) $2,000 better off

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Definitions:

TPS

Stands for Transaction Processing System, a type of information system that collects, stores, modifies, and retrieves the transactions of an organization.

JIT Partnerships

Refers to Just-In-Time partnerships, a collaboration between suppliers and manufacturers to ensure materials are delivered just in time for production, reducing inventory costs and enhancing efficiency.

Variability

Variability refers to the extent to which data points in a set differ from the average value.

JIT

Just-In-Time is a management strategy that aligns raw-material orders from suppliers directly with production schedules, aiming to minimize inventory costs and increase efficiency.