CRYSTAL S.A. is a Greek commercial fridge manufacturer. During packaging, CRYSTAL uses a wooden platform (pallet) under the fridge. The pallets use some wooden pegs (nogs). However, some nogs could be missing. The cost of inspecting a pallet is $0.119
The average cost of putting nogs in pallets missing them is $0.535 per pallet. If the defect is not identified before the pallet is used in packaging, it will cost $2.30 to take the fridge off, insert the nogs in the pallet, and put the fridge back on the pallet. The pallets are bought in lot sizes of 800. The percentage of defective pallets in the past has ranged between 5 percent and 8 percent.
a. Should the company perform 100 percent inspection, acceptance sampling, or no inspection?
b. If acceptance sampling is best, what sampling plan should the company use? Justify your choice.