Consider a drill press containing three drill bits. The current policy (called individual replacement) is to replace a drill bit when it fails. The firm is considering changing to a block replacement policy in which all three drillbits are replaced whenever a single drill bit fails. Each time the drill press is shut down, the cost is $100. A drill bit costs $50, and the variable cost of replacing a drill bit is $10. Assume that the time to replace a drill bit isnegligible. Also, assume that the time until failure for a drill bit follows an exponential distribution with a mean of 100 hours. This can be modeled in @RISK with the formula 5RISKEXPON (100). (Note: If you have the academic version of @RISK, this problem will require more RISKEXPON functions than the 100 allowed, but there is an easy workaround. An exponentially distributed random variable can be generated with Excel functions only using the formula =-Mean*LN(RAND()). Then @RISK can still be used to run the simulation.) Determine which replacement policy (block or individual replacement) should be implemented.
Consider a drill press containing three drill bits. The current policy (called individual replacement) is to replace a drill bit when it fails. The firm is considering changing to a block replacement policy in which all three drill
bits are replaced whenever a single drill bit fails. Each time the drill press is shut down, the cost is $100. A drill bit costs $50, and the variable cost of replacing a drill bit is $10. Assume that the time to replace a drill bit is
negligible. Also, assume that the time until failure for a drill bit follows an exponential distribution with a mean of 100 hours. This can be modeled in @RISK with the formula 5RISKEXPON (100). (Note: If you have the academic version of @RISK, this problem will require more RISKEXPON functions than the 100 allowed, but there is an easy workaround. An exponentially distributed random variable can be generated with Excel functions only using the formula =-Mean*LN(RAND()). Then @RISK can still be used to run the simulation.) Determine which replacement policy (block or individual replacement) should be implemented.
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