The Quality Manager for Frozen Pizzas, Inc

Multiple Choice

The quality manager for Frozen Pizzas, Inc., is concerned about the quality of the lot of several thousand pizzas which his company produced this week, and is now ready to ship. If the cost of replacing a defective pizza once it has been shipped is $5.00, while the cost of complete (100 percent) inspection prior to shipment is $.30 per pizza, what is the point of indifference between complete inspection and shipment without inspection?

A) 1.67 percent defectives
B) 3 percent defectives
C) 5 percent defectives
D) 6 percent defectives
E) 16.7 percent defectives