Question

Let us consider again the equipment rental process. This time we take the perspective of the site engineer, whose goal is to have the required equipment available on site when needed. From this perspective, the main issue is that in about 10 % of cases, the requested equipment is not available on site the day when it is required. When this happens, the site engineer contacts the suppliers directly to resolve the issue, but still, resolving the issue may take several days. It is estimated that each such delay costs $400 per day to BuildIT. By inspecting a random sample of delayed equipment deliveries during a one - year period and investigating the cause of each occurrence, an analyst found that:

41 occurrences were due to the equipment having been delivered on time, but the equipment was not suitable and the site engineer rejected it. These cases cause delays of two days on average.

Question-

What is the cost for the rejected equipment in the sample? (Select 1)

A-20000

B-32000   

C-32800

D-33000

Answer 1

Cost of delay = number of delays x number of days of rejection x cost per day for delay

= 41x400x2 = 32800

Option C is the correct response.