Question

A ready-to-assemble (RTA) furniture hardware kit requires (2) long bolts, (4) medium bolts, (6) short bolts, and (12) nuts. The defect rates are, respectively, 0.2%, 0.08%, 0.35%, and 0.19%. The costs of each are, respectively, $0.081, $0.076, $0.064, and $0.021. If there are any defective pieces, a whole new hardware kit is shipped for a total cost (with shipping) of $16.50. What parts should include one extra piece (if any) to be more cost effective? (20 points) 2.

Answer 1

We can see that the defect rate of SHORT BOLT is maximum i.e 35% and short bolt is having cost as  $0.064. if any defect is found,a whole new kit would be shipped which causes more cost to the company.

Since the defect rate of short bolt is higher ,it is advisable to keep an extra short bolt since the cost of shipping whole new kit is far higher than keeping an extra short bolts.