Question

Which of the following statements would be most likely to minimize expected fixing costs? a. A machine should always be calibrated at the midpoint between the upper and lower spec limits. b. A machine should be calibrated closer to the upper spec limit than the lower spec limit if the cost of fixing output that is too high is greater than the cost of fixing output that is too low. c. A machine should be calibrated closer to the lower spec limit than the upper spec limit if the cost of fixing output that is too high is greater than the cost of fixing output that is too low.

Answer 1

Answer: c. A machine should be calibrated closer to the lower spec limit than the upper spec limit if the cost of fixing output that is too high is greater than the cost of fixing output that is too low.

Step-by-step explanation:

If the cost of fixing output that is too high is greater than the cost of fixing output that is too low then it make sense to calibrate the machine closer to the lower spec limit.

This way if the machine produces less output than is required, it can be fixed at a lower cost than if the machine had been set to the upper spec and produces output that is too high.