Problem:

Output from a process contains 0.03 defective units. Defective units that go undetected into final assemblies cost $25 each to replace. An inspection process, which would detect and remove all defectives, can be established to test these units. However, the inspector, who can test 20 units per hour, is paid $8 per hour, including fringe benefits.

Required:

Question 1) If the inspector position is eliminated, what will the hourly cost of defects be? (Round your answer to 2 decimal places.)

Question 2) Should an inspection station be established to test all units?

Question 3) What is the cost to inspect each unit? (Round your answer to 2 decimal places.)

Question 4) What is the benefit (or loss) from the inspection process?

Solve the given numerical problem and illustrate step by step calculation.