Homework (WK5)

Homework (WK5) - = $9 per hour, and repair cost is $10...

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Week 5 CH9A, Pages348, P1 A company currently using an inspection process in its material receiving department is trying to install an overall cost reduction program. One possible reduction is the elimination of one inspec- tion position. This position tests material that has a defective content on the average of 0.04. By inspecting all items, the inspector is able to remove all defects. The inspector can inspect 50 units per hour. The hourly rate including fringe benefits for this position is $9. If the inspection posi- tion is eliminated, defects will go into product assembly and will have to be replaced later at a cost of $10 each when they are detected in final product testing. Defective average = .04, inspection rate = 50 per hour, cost of inspector
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Unformatted text preview: = $9 per hour, and repair cost is $10 each. a. Should this inspection position be eliminated? No. Defective Cost of Inspector Content Replacing Position Units 0.04 $10.00 $9.00 Hourly Rate 50 2 $20.00 $11.00 Calculation Cost per hour No inspection .04 * (50) * $10 $20 Inspection 9 b. What is the cost to inspect each unit? Not sure here, anyone know this? $9 / 50 = $.18 $10 x 0.04 = $.40 c. Is there benefit (or loss) from the current inspection process? A benefit of How much? Hourly: cost of no inspection cost of inspection ($20 - $9 = $11 ) Per unit: average cost of quality cost of inspection ((.04)$10 - $.18 = $.22 ) References: Operations & Supply Management, Jacobs, Chase & Aquilano, Chapter 5, Pages 130-132, & 136...
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