Number of items the inspector can inspect per hour- 60 units Labor cost per hour
ID: 353411 • Letter: N
Question
Number of items the inspector can inspect per hour- 60 units Labor cost per hour for $12 the inspection Probability of defect- Cost to fix defect- 0.02 $A 1. 2. 3. 4. 5. 6. 7. What is the cost per hour to inspect? What is the cost per hour to not inspect? What is the per unit cost to inspect? What is the per unit cost to not inspect? Is there a benefit or loss associated with inspection? How much is the per unit benefit or loss associated with inspection? Should the inspection process be eliminated?Explanation / Answer
1. Cost per hour to inspect = $ 12
2. Expected number of defective units detected per hour = items inspected or not inspected per hour * probability of defect = 60*0.02 = 1.2
Cost per hour to not inspect = Expected number of defective units detected per hour * Cost to fix defect = 1.2*4 = $ 4.8
3. Per unit cost to inspect = 12/60 = $ 0.2
4. Per unit cost to not inspect = 4.8/60 = $ 0.08
5. It is apparent that per unit cost to inspect is higher, therefore, there is a loss associated with inspection.
6. Per unit loss associated with inspection = 0.2-0.08 = $ 0.12
7. Yes, the inspection process should be eliminated.
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