In the construction industry, the initial inspection of tie beams is estimated to cost $0.20 per unit. If, however, a nonconforming beam is allowed for construction purposes, the unit cost of rectifying and replacing it is $50.
What inspection policy should be followed, using Deming's kp rule, if the nonconformance rate of beams is 0.5%? What is the average savings in total inspection costs if 100% inspection is used as opposed to no inspection?