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Chrome File Edit View History Bookmarks People Window Help 52% CtJ: Tue 1:06 PM C ezto.mheducation.com/hm.tpx 1.00 points Problem 10-17 A company currently using an inspection process in its material receiving department is trying to install an overall cost reduction program. One possible reduction is the elimination of one inspection position. This position tests items for which the probability of a material defect averages 0.01. By inspecting all items, the inspector is able to remove all defects. The inspector can inspect 55 units per hour. The hourly rate including fringe benefits for this position is $10. If the inspection position is eliminated, defects will go into product assembly and will have to be replaced later at a cost of $11 each when they are detected in final product testing. Assume that the line will operate at the same rate (i.e., the inspection 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 answer to 2 decimal places.) Cost per hour a-2. Should this inspection position be eliminated based on costs alone? O Yes No 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 current inspection process? How much? (Input all amounts as positive values. Round your answers to 2 decimal places.) Hourly Per unit (Click to select) Hints References Hint #1

Explanation / Answer

Defective average = .04, inspection rate = 50 per hour, cost of inspector = $9 per hour, and repair cost is $10 each.

Solution a.      Calculation            Cost per hour

No inspection .01 * (55) * $11           $6.05

Inspection    $10

Therefore, it is not cheaper to inspect in this case.

b. Cost per unit for inspection = $10/55 = $.18

c. Benefit from the current inspection process is-

Hourly: cost of no inspection – cost of inspection ($6.05 - $10 = -$3.95)

Per unit: average cost of quality – cost of inspection ((.01)$11 - $.18 = -$0.07)

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