Joy Land Toys, a toy manufacturer, is experiencing quality problems on its assem

Question

Joy Land Toys, a toy manufacturer, is experiencing quality problems on its assembly line. The marketing division estimates that each defective toy that leaves the plant costs the firm $10, on average, for replacement or repair. The engineering department recommends hiring quality inspectors to sample for defective toys. In this way many quality problems can be caught and prevented before shipping. After visiting other companies, a management team derives the following schedule showing the approximate number of defective toys that would be produced for several levels of inspection: Average number Number of of defective toys Inspectors (per day) . 0 92 1 62 2 42 3 27 4 17 5 10 6 5 The daily wage of inspectors is $70. How many inspectors should the firm hire? What would your answer to (a) be if the wage rate is $90? What if the average cost of a defective toy is $5 and the wage rate of inspectors is $70?

Explanation / Answer

a.)

Because the cost to the firm is equal with either four or five inspectors, the firm could hire either number; however, I would recommend hiring five because there would be less toys returned, helping the company to maintain a good image/reputation with its customers.

How many inspectors should the firm hire? Cost to the firm with 0 inspectors: 92*10= $920.00 Cost to the firm with 1 inspector: 62*10= $620.00 1*70= $70.00 $690.00 Cost to the firm with 2 inspectors: 42*10= $420.00 2*70= $140.00 $560.00 Cost to the firm with 3 inspectors: 27*10= $270.00 3*70= $210.00 $480.00 Cost to the firm with 4 inspectors: 17*10= $170.00 4*70= $280.00 $450.00 Cost to the firm with 5 inspectors: 10*10= $100.00 5*70= $350.00 $450.00 Cost to the firm with 6 inspectors: 5*10= $50.00 6*70= $420.00 $470.00

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