mgr econ 8 - Inspector s Avg. #of Def. Toys (per day) 0...

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4. 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 reduced 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. a. How many inspectors should the firm hire? The firm should hire 5 Inspectors. Since the daily wage of inspectors is $70, each inspectors wage increases by 70. *Note $450 is the lowest cost
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Unformatted text preview: Inspector s Avg. #of Def. Toys (per day) 0 $920 =0+920 1 $690 =70+620 2 $560 =140+42 3 $480 =210+27 4 $450 =280+17 5 $450 =350+10 6 $470 =420+50 b. What would your answer to (a) be if the wage rate is $90/day? The firm should hire 4 Inspectors. Each inspectors wage rate would by $90.00 per day. *Note $530 is the lowest cost Inspecto rs Avg. #of Def. Toys (per day) $90 $920 =0+920 1 $710 =90+620 2 $600 =180+42 3 $540 =270+27 4 $530 =360+17 c. What if the average cost of a defective toy is $5 and the wage rate of inspectors is $70? The firm should hire 3 inspectors. *Note $345 is the lowest cost Inspecto rs Avg. #of Def. Toys (per day) $70 $460 =0+460 1 $380 =70+310 2 $350 =140+21 3 $345 =210+13 5 4 $365 =280+85 5 $400 =350+50...
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This note was uploaded on 04/14/2010 for the course ECON 2345 taught by Professor Jamison during the Spring '10 term at York University.

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mgr econ 8 - Inspector s Avg. #of Def. Toys (per day) 0...

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