An Inspection Decision with Quality Costs

question 9

Essay

An Inspection Decision with Quality Costs
A company is considering additional final inspection costs of $1 per unit before delivery to customers. The additional inspection should reduce the defective rate from 3 percent to 1 percent. If a defective unit is found, it is scrapped at no additional cost. The manufacturing costs before the final inspection are $200 per unit. The management believes that the external failure costs are $40 per defective unit.
Required:
Should the management incur the additional inspection costs?

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Definitions:

Join Query

A query used to extract data that’s in two or more tables in a database.

Select Query

In Structured Query Language, displays a subset of data from a table (or tables) based on the criteria specified.

Criteria Query

A method of querying in a database or a data technology platform that uses specific criteria to filter or select data.

Related Records

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