A company currently using an inspection process in its material receiving department is trying to install an overall reduction program. One possible reduction is the elimination of one inspection position. The position tests items for which the probability of a material defect averages 0.04. By inspecting all items, the inspector is able to remove all defects. . The inspector can inspect 53 units per hour. The hourly rate including fringe benefits for this position is $15. If the inspection position is eliminated, defects will go into product assembly and will have to be replaced later at a cost of $8 each when they are detected in final product testing."Assume that the line will operate at the same rate ( inspection rate), if the inspection operation was eliminated.
A1, If the inspector position is eliminated what will the hourly cost of defects be?
A2, Should this inspection process be eliminated based on costs alone?
B. What is the cost to inspect each unit?
C. Is there benefit or loss from the current inspection process? How much?
Per unit? Hourly?