The manager from the previous problem has found a piece of
equipment that will reduce the cost of cleaning the leveler to $80. This manager realizes
that if the cost of a PM is reduced, the optimum time between PMs will be reduced, and the
optimum cost will decrease. The savings gained is not the number of PMs multiplied
by the savings per PM. Before investing in this cleaning equipment, the manager wants to
quantify the savings.
To do this, follow the steps in Example 3, but enter $80 as the cost of a PM. The optimum time between PMs is 24.05 million feet of leveled metal at an optimum cost of $4.259 per million feet of leveled metal. Investing in this equipment would net $3.629 ($7.888-$4.259) per million feet of leveled metal.