Problem 9A - Problem 9A-1 A company currently using an...

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Problem 9A-1 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 inspection position. This position tests material that has a defective content on the average of . 07. 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 $14. If the inspection position is eliminated, defects will go into product assembly and will have to be replaced later at a cost of $15 each when they are detected in final product testing. (b ) What is the cost to inspect each unit? (Round your answer to 2 decimal places. Omit the "$" sign in your response.) Cost per unit $ (c) Is there benefit (or loss) from the current inspection process? How much? (Round your answers to 2 decimal places. Omit the "$" sign in your response.) Hourly Per unit Benefit $ $ (d ) Based on the above parts, what is your conclusion? Inspection position should be used. Explanation: Defective average = .07, inspection rate = 53 per hour, cost of inspector = $14 per hour, and replacement cost is $15 each. Calculati on Cost per hour No inspectio n .07 × (53) × $15 $ 55.65 Inspecti on 14 Cost per unit for inspection = $14/53 = $.26 Benefit from the current inspection process is Hourly: cost of no inspection – cost of inspection ($55.65 – $14 = $41.65) Per unit: average cost of quality – cost of inspection ((.07) $15 – $.26 = $.79)
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SA MP LE n NU MB ER OF DEF ECT S IN SA MP LE SA MP LE n NUMBER OF
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This note was uploaded on 03/22/2012 for the course BUSINESS 101 taught by Professor Blanco during the Spring '12 term at Texas A&M University, Corpus Christi.

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Problem 9A - Problem 9A-1 A company currently using an...

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