The Optimum Level of Inspection for Quality Control Is Where

question 6

Multiple Choice

The optimum level of inspection for quality control is where the:

• A)cost of inspection is minimum.
• B)cost of passing defectives is minimum.
• C)total cost of inspection and passing defectives is maximum.
• D)total cost of inspection and passing defectives is minimum.
• E)difference in inspection and defectives costs is minimum.

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Definitions:

IRR

Internal Rate of Return; a financial metric used to evaluate the profitability of investments, representing the discount rate that makes the net present value (NPV) of all cash flows equal to zero.

Net Cash Flows

The difference between a company's cash inflows and outflows during a specific period, representing its ability to generate value.

Depreciation

The accounting entry allocating the cost of a long-lived asset against income over the asset’s life. Depreciation is a noncash charge, so net income is generally less than true cash flow by at least the amount of depreciation.

Opportunity Costs

The cost of foregoing the next best alternative when making a decision.