1)There is a 3 percent error rate at a specific point in a production process. If an inspector is placed at this point, all the errors can be detected and eliminated. However, the inspector is paid $8 per hour and can inspect units in the process at the rate of 30 per hour. 10 MARKS If no inspector is used and defects are allowed to pass this point, there is a cost of $10 per unit to correct the defect later on. Assume that the line will operate at the same rate (i.e., the current production rate) regardless of whether the inspector is hired or not.

a) If an inspector is hired, what will be the inspection cost per unit? (Round your answer to 3 decimal places.)

b) If an inspector is not hired, what will be the defective cost per unit? (Round your answer to 3 decimal places.)

c) Should an inspector be hired based on costs alone?

2)The following table lists all costs of quality incurred by Sams Surf Shop last year. 2 MARKS Annual inspection costs $165,000 Annual cost of scrap materials 336,000 Annual rework cost 84,679 Annual cost of quality training 506,000 Annual warranty cost 1,646,000 Annual testing cost 528,000

a) What was Sams appraisal cost for quality last year?