The probability that equipment used in a hospital lab will need recalibration is given in the following table. A service firm is willing to perform maintenance and do any necessary calibrations for a fee of $650 per month. Recalibration costs $500 per time. Which approach would be most costeffective, recalibration as needed or the service contract?

Number of Recalibrations 0 1 2 3 4 Probability of Occurrence .15 .25 .30 .20 .10

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