# How many inspectors should the firm hire?

each for rep Show more ABC Inc. estimates that sales of defective thermostats cost the firm an average of \$50 each for replacement or repair. An independent engineering consultant has recommended hiring quality control inspectors so that defective thermostats can be identified and corrected before shipping. The following schedule shows the expected relation between the number of quality control inspectors and the thermostat failure rate defined in terms of the percentage of total shipments that prove to be defective. Number of Quality Control Inspectors Thermostat Failure Rate (percent) 0 5.0 1 4.0 2 3.2 3 2.6 4 2.2 5 2.0 The firm expects to ship 250000 thermostats during the coming year and quality control inspectors command a salary of \$60000 per year A. Construct a table showing the marginal failure reduction (in units) and the dollar value of these reductions for each inspector hired. (Complete the following Table) Note percentages in column 2 have been converted to decimal equivalents.) Inspectors Failure Rate Total Number of Failures Marginal Failure Reduction Marginal Value of failures 0 .05 1 .04 2 .032 3 .026 4 .022 5 .02 B. How many inspectors should the firm hire? Show less

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