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9 January, 03:03

A certain type of injury has tangible costs of $15,000 per occurrence and intangible costs estimated to be $250,000 per occurrence. Injury frequency is 0.01 per year, but would be reduced by half with the installation of a new engineering control system. What annual benefit would the new system provide?

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  1. 9 January, 03:23
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    Annual benefit provided by New system = $1,325

    Explanation:

    Given:

    Tangible cost = $15,000

    Intangible cost = $250,000

    Frequency of injuries = 0.01 per year

    New frequency of injuries = (0.01) / 2 = 0.005 per year

    Computation:

    Total cost = Tangible cost + Intangible cost

    Total cost = $15,000 + $250,000

    = $265,000

    Before New system installation:

    Expected cost per year = Total cost per incident x Frequency of injuries

    Expected cost per year = $265,000 x 0.01 = $2,650

    After New system installation:.

    Expected cost per year = Total cost per incident x New frequency of injuries

    Expected cost per year = $265,000 x 0.005 = $1325

    Annual benefit = $2,650 - $1,325 = $1,325
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