AT&T; 12:34 AM ezto.mheducation.com 1 10.0 points Problem 10-19 Output from a pr
ID: 352732 • Letter: A
Question
AT&T; 12:34 AM ezto.mheducation.com 1 10.0 points Problem 10-19 Output from a process contains 0.02 proportion of defective units. Defective units that go undetected into final assemblies cost $25 each to replace. An inspection process, which would detect and remove all defectives, can be established to test these units. The inspector, who can test 22 units per hour (which matches the current production rate), would be paid $10 per hour, including fringe benefits. Assume that the line will operate at the same rate (i.e, the current production rate) regardless of whether or not the inspection operation is added. a-1. Without the inspector, what is the current hourly cost of defects? (Round your answer to 2 decimal places.) Cost per hour a-2. Should an inspection station be established to test all units based on costs alone? a-3. If the inspection operation is added, what would be the cost to inspect each unit? (Round your answer to 2 decimal places.) Cost to inspect per unit b. What would be the benefit (or loss) from establishing the inspection process? (Input the amount as a positive value. Round your answer to 2 decimal places.) sper unit Leaning Ove 10-0Explanation / Answer
1. Defective units in 100 output units = 2
Current production of units in 1 hour = 22
Defective units in 22 output units = 0.02*22 = 0.44
Replacement cost of 1 defective unit = $25
Replacement cost of 0.44 defective units = 25*0.44 = $11
So current hourly cost of defects = $11
2. Yes, an inspection station should be established to test all units because inspection cost per hour is $10 whereas current hourly cost of defects is $11. So it would result in saving $1 if inspection station is established.
3. Cost to inspect 22 units = $10
Cost to inspect 1 unit = 10/22 = $0.45
4. Inspection cost per hour = $10
Current hourly cost of defects = $11
So benefit of establishing inspection process per hour = 11 - 10 = $1