(a) Computes the profit margin per week for the current system.

(b) TOE is comparing two possible improvement options:

Option 1. Decrease time in major repairs from 0.8 weeks to 0.2 week.

Option 2. Decrease cost per major repair from $20,000 to $X while keeping flow time in repair at 0.8 weeks.

TOE will adopt Option 2 if X is higher or lower than _$____________. Why?

a TX Oil Exploration Company (TOE) survey/explore/drill (SED) potential oil wells in South Gangwon province. TOE currently SED 500 oil wells per week. TOE either successfully SED an oil well or fail to do so. The oil well is either a small oil well or a large oil well. It usually takes 3 weeks to SED a small oil well and 5 weeks to SED a large oil well. 30% of the oil wells are large oil well with the rest being small oil well. A successfully survey/explore/ drilled (SED) oil well will generate a revenue of $30,000 if it is a small oil well, and $100,000 if it is a large oil well. 70% of large oil wells will be successfully SED, and 90% of small oils well will be successfully SED. A small oil well requires 10 engineers, and a large oil well requires 15 engineers. The company pays $400 per week to an engineer. Each SED process requires using an oil drilling/testing equipment (ODT). Approximately 30% of the ODTs returned are found to be defective and in need of major repairs before they can be made available for SED again. The remaining ODTs are going through routine maintenance and made available for the next SED project. On average, there are 60 ODTs going through the routine maintenance process. The cost of routine maintenance is $7,000 per ODT equipment. On average, the major repair process spends 0.8 weeks and incur an average cost of $20,000 per ODT. Assume that ODTs are sent to a SED project as soon as they are available for working. Assume that each ODT loses $600 in value per week because of depreciation