Suppose That a Manufacturing Plant Is Considering Contracting Out Some

question 106

Essay

Suppose that a manufacturing plant is considering contracting out some preventative maintenance work.For $2000 each year a firm would cover all breakdowns free of charge and provide preventative maintenance.Two other options exist that entail the use of regular employees however.The first is to skip preventative measures and simply fix breakdowns,which occur at a rate of 2/year.Each breakdown costs about $750 to fix.The final option is to divert excess labour capacity to preventative measures,which reduces the chance of a breakdown per year by Y% given X hours of preventative maintenance subject to Y = 10X - X^2.If each preventative maintenance hour costs $50,which option should the firm choose?

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Definitions:

Elementary Type

Basic or fundamental categories or classifications, often used in the context of general characteristics or primary distinctions.

Functional Design

The process of creating products with a focus on practicality and efficiency, ensuring they perform their intended function well.

Organization Design

The process of shaping an organization's structure and roles to align with its business strategies, goals, and environment.

Functional Organization

A type of organizational structure where the company is divided into departments based on functions such as marketing, finance, and operations.