There is a 4 percent error rate at a specific point in a production process. If an inspector is placed at this point, all the defects can be detected and eliminated. The inspector would cost $9 per hour and could inspect units in the process at the current production rate of 46 per hour. If no inspector is hired and defects are allowed to pass this point, there is a cost of $10 per defective unit to correct the defects later on. Assume that the line will operate at the same rate (i.e., the current production rate) regardless of whether the inspector is hired or not. a. if the inspector is hired, what will be the inspection cost per unit? b. if an inspector is not hired, what will be the defective cost per unit? c. should an inspector be hired based on costs alone?
There is a 4 percent error rate at a specific point in a production process. If an inspector is placed at this point, all the defects can be detected and eliminated. The inspector would cost $9 per hour and could inspect units in the process at the current production rate of 46 per hour. If no inspector is hired and defects are allowed to pass this point, there is a cost of $10 per defective unit to correct the defects later on. Assume that the line will operate at the same rate (i.e., the current production rate) regardless of whether the inspector is hired or not. a. if the inspector is hired, what will be the inspection cost per unit? b. if an inspector is not hired, what will be the defective cost per unit? c. should an inspector be hired based on costs alone?
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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There is a 4 percent error rate at a specific point in a production process. If an inspector is placed at this point, all the defects can be detected and eliminated. The inspector would cost $9 per hour and could inspect units in the process at the current production rate of 46 per hour.
If no inspector is hired and defects are allowed to pass this point, there is a cost of $10 per defective unit to correct the defects later on.
Assume that the line will operate at the same rate (i.e., the current production rate) regardless of whether the inspector is hired or not.
a. if the inspector is hired, what will be the inspection cost per unit?
b. if an inspector is not hired, what will be the defective cost per unit?
c. should an inspector be hired based on costs alone?
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