- Production management aims to maximize profit by increasing salable output while reducing the cost related with inspection, where inspection is defined as the measurement and quality assessment of items produced. This study is based on a semiconductor production line with consecutive deteriorating machines. Each machine is inspected via the items it produces and an inspection result triggers a machine's repair, if needed. Inspection related cost includes fixed and variable cost of inspection capacity, Yield Loss Cost generated due to unsalable throughput, and delivery delay cost caused by inspection flow-time. The effects of inspection capacity and inspection rate on cost are investigated using analytical and simulation models. Under a given inspection capacity, Yield Loss Cost decreases with growing inspection rate until a minimum is reached, and then starts to increase with further growing rate. This increase is explained by the impact of higher load on the inspection facility, which prolongs the inspection response time. Thus, an optimal inspection rate can be derived for a given inspection capacity. It will be shown that the higher the capacity, the higher the optimal rate, and the lower the yield loss. Determination of optimal inspection capacity considers the capacity cost against the other costs and minimizes the total expected inspection related costs.