Question: La Queue Company is experiencing problems with the handle on the carafe of its Euro-design coffeemaker. The handle breaks and must be replaced 5 percent

La Queue Company is experiencing problems with the handle on the carafe of its Euro-design coffeemaker. The handle breaks and must be replaced 5 percent of the time. It costs 50 each time to replace the carafe. La Queue replaces the carafe and ships it by express courier to appease customers who cannot use their coffeemakers while awaiting a replacement. La Queue is considering the use of a specialty plastic for the handle that would not break, even under extreme use. The new plastic would increase its production costs by 10,000 per year. An alternative to the new plastic is to examine each carafe to see if the handle is defective. It would cost 3 per carafe to add this inspection. This year, La Queue plans to manufacture and sell an additional 5,000 coffeemakers. Next year, it plans to replace the model with a new design.

What should La Queue do?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Accounting Questions!