A manufacturer of industrial paper shredders can make its machines safer by adding a laser-sensored kill switch to its products. Adding the kill switch costs $17 per machine
The manufacturer estimates that this will prevent 50 injuries for every 30,000 paper shredders sold and that, on average, each injury causes $5,500 of harm. What is the injury cost per paper shredder? Explain whether the manufacturer should or should not add the kill switch to the paper shredder.
The injury cost per paper shredder is 50 × ($5,500 / 30,000 ) = $9.17. Since the kill switch costs $17 per machine, which is more than the injury cost per paper shredder, the manufacturer should not add the kill switch because to do so would not be cost justified.
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