Abstract This paper presents the cost analysis of a 2-unit system with 3 states: good, degraded and failed. The units suffer from two types of failure: partial and catastrophic. The partial failure brings a unit to degraded state, whereas the catastrophic failure breaks down a unit completely. There is one repair facility, which is availed only when the system is either degraded or failed. The failure and repair times for the system follow exponential and general distributions respectively. Laplace transforms of various probability states have been obtained along with steady-state behaviour of the system. Inversions have also been computed so as to obtain time dependent probabilities, which determine expected profit as well as availability of the system at any time.