The Crystal Window Company makes windows at three locations: Reno, Las Vegas, and Boise. Some windows made by the company contain a visible defect and must be replaced. Each defect costs the company $45.00. The Reno plant makes 40 percent of all windows while the Las Vegas and Boise plants split the remaining production evenly. A recent quality study shows that 8 percent of the Reno windows contain a defect, 11 percent of the Las Vegas windows contain a defect, while 4 percent of the windows made in Boise have a defect. Once the windows are made, they are shipped to a central warehouse where they are commingled and the location where they were made is lost. Based on this information, the percentage of the defective cost that should be allocated to the Reno plant is approximately 42 percent.

Question

Quizplus · Accepted Answer

The Reno plant makes 40% of all windows, and 8% of those windows are defective. So, the Reno plant is responsible for 40% * 8% = 3.2% of all defective windows. The total cost of defective windows is $45.00 per window, so the Reno plant is responsible for 3.2% * $45.00 = $1.44 per defective window. The total cost of defective windows is $1.44 / $3.44 * 100% = 42%.

The Crystal Window Company Makes Windows at Three Locations: Reno