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?
