Reliability Analysis: Breakeven Volume Analysis

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Register to read the introduction… If one of the machines should malfunction, machine one would be the appropriate choice for a back up. The chances of machine one breaking down is far less possible than the other two machines. Reliability is the probability that a machine will function properly for a specified time (Heizer, J. and Render, B. 2010). I recommend the following things to keep the machines up and running with the best possible efficiency: regular/preventative maintenance and well-trained personnel. Implementing these strategies will not only help the longevity of the machines but will save the company money on repairs in the long …show more content…
In this case, we had 2 costs, fixed and variable, and 3 different options, reconstructing old equipment, purchasing new equipment, and outsourcing. This decision analysis tool allowed me to construct a crossover chart which showed the points at which the costs of the options demonstrated an advantage over the other.

A1. Submit a copy of the output from your decision analysis tool of choice. a. Explain why you chose the decision analysis tool you used.

The decision analysis tool I chose to solve this specific issue was the breakeven cost volume analysis tool, because it was easy to use and had specific parameters already in place to account for each type of cost and the number of options available. Since there are two costs (fixed and variable) and three different options (reconstructing, purchasing, or outsourcing), the decision analysis tool allowed me to graph a crossover chart that detailed the points at which the cost of each option became advantageous over the other.
A review of the breakeven analysis shows that the breakeven points for each option are as follows:

Option | Breakeven Point | Cost | Recondition vs. Outsource | 25 units | $75,000 | Purchase vs. Outsource | 80 units | $240,000

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