Schwinn has a 2% reject rate. If its factory can produce 200 bicycles a day and they cost $500 to produce, how much could Schwinn save if it had a 1% reject rate?

Question

Quizplus · Accepted Answer

Schwinn produces 200 bicycles a day and has a 2% reject rate, which means they are rejecting 4 bicycles a day (2% of 200). If each bicycle costs $500 to produce, then 4 bicycles cost $2000 to produce.

If Schwinn could reduce the reject rate to 1%, they would only be rejecting 2 bicycles a day (1% of 200). This would cost them $1000 to produce (2 bicycles x $500 each).

Therefore, Schwinn could save $1000 per day if they reduced their reject rate to 1%. Over the course of a year, this would add up to significant savings.

Schwinn Has a 2% Reject Rate