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Joy Land Toys

Joy Land Toys, a toy manufacturer, is experiencing quality problems on its assembly line. The marketing divisions 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 produced for several levels of inspection:

Number of Inspectors Average number of defective toys 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?
b. What would your answer to a be if the wage rate is $90?
c. What if the average cost of a defective toy is $5 and the wage rate of inspectors is $70?

Solution Preview

Hi,
Please see attached file for solution.

No. of inspectors Cost of inspectors Defective toys Cost of defective toys Total costs
0 $0 92 $920 $920
1 $70 62 $620 $690
2 $140 42 $420 $560
3 $210 27 $270 $480
4 $280 17 $170 $450
5 $350 10 $100 $450
6 $420 5 $50 $470

Unit cost of inspector $70
Unit cost of defective toy $10

a. How ...

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