The fire department has a number of failures with its oxygen masks and is evaluating the possibility of outsourcing preventive maintenance to the manufacturer. Because of the risk associated with a? failure, the cost of each failure is estimated at $2,000. The current maintenance policy? (with station employees performing? maintenance) has yielded the following? history:
Number of breakdowns 0 1 2 3 4 5
Number of years in which breakdowns occurred 5 2 3 3 7 0
a) What is the expected annual cost of the current maintenance policy with station employees performing maintenance?
b) Which is the more economical practice to use? Assume that if the maintenance is outsourced, the workers currently performing this work will keep their jobs.