The company has two options either to replace the defective models with new one and then sell them at discounted price or spend the cost of inspection to make 100% quality goods. The cost of two options will determine what to do. In first option the cost is the discount which is given for sell of defective units. If suppose company offers a 30% discount which cost around $15 per unit and if total expected defective units are 100 units then the total cost will be $1500. And if the increased inspection cost is more than this then company should adopt trade in program, but if the increased inspection cost is near or around $1500, company should go for inspection and produce 100% good quality goods. Another important point to be considered is the convenience of the customer. The customer will prefer to get good quality goods at once, and they will not prefer to exchange the goods with new one. Therefore even if the cost of 100% inspection is near or little more than trade in program, the 100% inspection cost to be incurred and the customer should be provided goods quality goods at once.