A company is reviewing its policy of putting each sub-assembly bought in from outside through a detailed inspection process on delivery. The firm can either inspect or not inspect. The sub-assembly may either come up to the required quality standard (90 % of the time), or fail to do so (10 % of the time). It costs K10 to inspect a sub-assembly and another K10 to put right any defect found at that stage. If the sub-assembly is not inspected and is then found to be faulty at the finished goods stage the cost of rework is K40. Advise the firm what to do?
A company is reviewing its policy of putting each sub-assembly bought in from outside through a detailed inspection process on delivery. The firm can either inspect or not inspect. The sub-assembly may either come up to the required quality standard (90 % of the time), or fail to do so (10 % of the time). It costs K10 to inspect a sub-assembly and another K10 to put right any defect found at that stage. If the sub-assembly is not inspected and is then found to be faulty at the finished goods stage the cost of rework is K40. Advise the firm what to do?
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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A company is reviewing its policy of putting each sub-assembly bought in from outside through a detailed inspection process on delivery. The firm can either inspect or not inspect. The sub-assembly may either come up to the required quality standard (90 % of the time), or fail to do so (10 % of the time). It costs K10 to inspect a sub-assembly and another K10 to put right any defect found at that stage. If the sub-assembly is not inspected and is then found to be faulty at the finished goods stage the cost of rework is K40. Advise the firm what to do?
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