Question: PIM Industries Incorporated manufactures electronics components. Each unit costs $ 4 0 before the final test. The final test rejects, on average, 5 % of

PIM Industries Incorporated manufactures electronics components. Each unit costs $40 before the final test. The final test rejects, on average, 5% of the 50,000 units manufactured per year. The average rejection rate of the industry is 3%. A consultant has determined that poor lighting is the most likely cause of this high rejection rate. It would cost $125,000 to install adequate lighting in the assembly department, which would be useful for 5 years. With adequate lighting (which will cost an additional $5,500 of operating costs per year), the firm expects to reduce its rejection rate to no higher than the industry average.

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