The failure rate of some electrical components is said to be as follows.
End of Month                     1           2              3         4        5           6              7          8
cumulative failure rate  0.05      0.10         0.25   0.40    0.70      0.90        0.95      1.00
The replacement cost per failed unit component is 4k. For group replacement, the unit replacement cost is 1k. What is the optimal period for group replacement?
What is the annual cost savings relative to the unit replacement policy?
Assume the number of parts is 100.

Answer rating: 100% (QA)

Answer 1 The optimal period for group replacement is 6 months This is because the cumulative failure ... View the full answer