Suppose that the prevention and appraisal cost functions are given by Cp= 50q2 and Ca =10q, respectively,

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Suppose that the prevention and appraisal cost functions are given by Cp= 50q2 and Ca =10q, respectively, where q represents the degree of quality level (0< q< 1). The cost of reworking a unit is $5, and the cost of a customer obtaining a nonconforming product is $85. Assume that these cost functions are linear in 1 processes. Based on the improved product design, the company expects sales to increase from 200,000 units last year to 220,000 units in the current year. Further, due to added functionality, the company plans to increase the product unit price from $300 to $350. At the end of the year, they found that rework and scrap costs had reduced from $70,000 in the previous year to $30,000 in the current year. What is the percentage increase in net profit, ignoring other costs? Was this a good investment?

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