Despite extensive quality control efforts, the Model Q sparkplug production line produces plugs with an average defect rate of 4%.Sparkplugs cost $.80 each to produce and the warranty cost for each defective item shipped is estimated to be $2.50.Management is considering the installation of a testing device for
identifying defective sparkplugs.The unit will correctly select
99% of the defective plugs but, unfortunately, will also incorrectly show as defective 5% of the non-defective plugs.Any plug labeled as defective will be discarded.Testing will cost $.025 per sparkplug.
Should the firm install the testing unit?

Question

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The Answer of Despite extensive quality control efforts, the Model Q sparkplug production line produces plugs with an average defect rate of 4%.Sparkplugs cost $.80 each to produce and the warranty cost for each defective item shipped is estimated to be $2.50.Management is considering the installation of a testing device for
identifying defective sparkplugs.The unit will correctly select
99% of the defective plugs but, unfortunately, will also incorrectly show as defective 5% of the non-defective plugs.Any plug labeled as defective will be discarded.Testing will cost $.025 per sparkplug.
Should the firm install the testing unit?

Despite Extensive Quality Control Efforts, the Model Q Sparkplug Production