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g Over the last several years your company has collected the following monthly repair frequency history on a key piece of manufacturing equipment. If the average repair cost (parts and labor) is $356/repair, calculate the expected annual repair budget for this piece of equipment. Repairs/month Probability 0 0.02 1 0.05 2 0.08 3 0.1 4 0.12 5 0.13 6 0.12 7 0.16 8 0.11 9 0.09 10 0.02

Answer :

Answer:

The expected annual repair budget for this piece of equipment is $1,933.20.

Explanation:

Note: See the attached excel file for the calculation of the expected annual repair budget for this piece of equipment.

In the attached excel file, the following formula is used

Expected monthly repair cost = Repairs/month * Probability * Average cost per repair

From the attached excel file, we have:

Expected annual repair budget = Total of expected monthly repair cost = $1,933.20

Therefore, the expected annual repair budget for this piece of equipment is $1,933.20.

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