A Cutting Tool Has a Lifetime That Is Normally Distributed

Essay

A cutting tool has a lifetime that is normally distributed with an average life of 400 hours and a standard deviation of 50 hours.Present policy is preventive maintenance which requires changing all cutting tools at the end of each month.Current operations are two shifts per day and 7 working hours per shift.At 20 days per month,each cutting tool is in use 280 hours per month.(All cutting tools that fail are simply shut down until the end of the month sweep).The variable costs of replacement under the current policy are $8 per tool plus installation labor of $6 per tool.There are 40 tools in use.
-Management is considering a change in policy that would change cutting tools every two months instead.Cutting tools that fail are replaced immediately,but the replacement labor is $16 per tool because each replacement is a special order.At the sweep,all tools,even recent replacements,are replaced.What is the annual cost of this proposed policy?