A process has a defective rate of 14%. Through 100% inspection all defective products are…

A process has a defective rate of 14%. Through 100% inspection all defective products are separated and sold to a scrap collector at 40% of its cost.

Each product costs $150 to construct or produce. The company applies a markup of 24% on all products for sale. Assume the total number of units to be 100.

Answer the following: The per unit sale price of “good” or “saleable” product is = $ ______________ .

Where:

  • The Number of defects = ____ units
  • Amount received from selling defectives = ___ units *defect rate * product cost = $___/unit
  • Total cost incurred = Total units x product cost = $____ .
  • Number of good products = Total units – Defective units = ___ units
  • Company applies a markup of 24%.
  • Total Revenue desired = (Total units * Unit cost) * (1 + markup) = $____ .
  • Total Revenue = Revenue from good products + Revenue from defectives.
  • Pricing = (Revenue from Good Products – Revenue from Defective Products) / Good Units
  • Note: x and * are multiplication signs.

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