A company buys in sub-assemblies in order to manufacture a product. It is reviewing its

policy of putting each sub-assembly through a detailed inspection process on delivery, and

is considering not inspecting at all. Experience has shown that the quality of the sub-assembly

is of acceptable standard 90 per cent of the time. It costs £10 to inspect a sub-assembly and

another £10 to put right any defect found at that stage. If the sub-assembly is not inspected

and is then found to be faulty at the finished goods stage the cost of rework is £40.

Requirement

Advise the company whether or not they should change their policy.