A company currently using an inspection process in its materialreceiving department is trying to install an overall cost reductionprogram. One possible reduction is the elimination of oneinspection position. This position tests items for which theprobability of a material defect averages 0.01. By inspecting allitems, the inspector is able to remove all defects. The inspectorcan inspect 50 units per hour. The hourly rate including fringebenefits for this position is $10. If the inspection position iseliminated, defects will go into product assembly and will have tobe replaced later at a cost of $11 each when they are detected infinal product testing.
Assume that the line will operate at the same rate (i.e., theinspection rate) if the inspection operation was eliminated.
a-1. If the inspector position is eliminated,what will the hourly cost of defects be? (Round your answerto 2 decimal places.)
Cost per hour $
a-2. Should this inspection position beeliminated based on costs alone?
b. What is the cost to inspect each unit?(Round your answer to 2 decimal places.)
Cost per unit $
c. Is there benefit (or loss) from the currentinspection process? How much? (Input all amounts aspositive values. Round your answers to 2 decimalplaces.)
| Hourly | Per unit |
| (Click toselect)LossBenefit | $ | $ |
|
