In one of PLE’s manufacturing facilities, a drill press that hasthree drill bits is used to fabricate metal parts. Drill bits breakoccasionally and need to be replaced. The present policy is toreplace a drill bit when it breaks or can no longer be used. Theoperations manager is considering a different policy in which allthree drill bits are replaced when any one bit breaks or needsreplacement. The rationale is that this would reduce downtime. Itcosts $200 each time the drill press must be shut down. A drill bitcosts $85, and the variable cost of replacing a drill bit is $14per bit. The company that supplies the drill bits has historicalevidence that the reliability of a single drill bit is describes bya Poisson probability distribution with the mean time betweenfailures is an exponential distribution with mean ? = 1 / ? = 1 /0.01 = 100 hours. (Professor Cursio: see below.) The operationsmanager at PLE would like to compare the cost of the tworeplacement policies. Develop spreadsheet models to determine thetotal cost for each policy over 1,000 hours and make arecommendation. Explain and summarize your findings in a report
