The Quality Manager for Microelectronics,Inc

question 38

Multiple Choice

The Quality Manager for Microelectronics,Inc.is concerned about the quality of the batch of several thousand IC's (integrated circuits) which his company is about to ship.If the cost of replacing a defective IC once it has been shipped is $5.00,while the cost of complete (100%) inspection prior to shipment is $.20 each,at what point is he indifferent between complete inspection or shipment without inspection?

• A)0% defectives
• B)4% defectives
• C)5% defectives
• D)9% defectives
• E)22% defectives

---

Definitions:

Contribution Margin Per Unit

The difference between the selling price per unit and variable cost per unit of a product.

Operating Leverage

A measure of how revenue growth translates into growth in operating income, influenced by the proportion of fixed costs in total costs.

Net Operating Income

Net Operating Income is the total profit of a company after deducting operating expenses but before interest and taxes.

Net Operating Income

A company's profitability from its regular business operations, excluding expenses and incomes from other non-operating activities.