The Frequency of Breakdown of a Piece of Equipment Per

question 16

Essay

The frequency of breakdown of a piece of equipment per month is shown in the following table. The cost of a breakdown is $1,000, and the cost of preventive maintenance is $2,000 per month. Assume that the equipment breakdown can be avoided if preventive maintenance is performed. Should the manager use preventive maintenance, or would it be better to fix the equipment when it breaks down?
$$\begin{array} { l c c c c c c } \text { Number of breakdowns } & 0 & 1 & 2 & 3 & 4 & 5 \\\text { Probability } & 0.10 & 0.15 & 0.20 & 0.30 & 0.15 & 0.10\end{array}$$
[COMP: Delete zeros before decimals in table.]

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Definitions:

Performance

The execution of duties or actions stipulated by a contract.

Third Party

An entity involved in a transaction or legal situation who is neither the first (often the buyer or claimant) nor the second (often the seller or defendant) principal party.

Express Condition

A specific and explicitly stated requirement in a contract that must be met for contractual obligations to be fulfilled.

Certificate of Occupancy

An official document issued by a local government agency or building department certifying a building's compliance with applicable building codes and other laws, indicating it is in a condition suitable for occupancy.