Due to the advances in automated manufacturing systems and automatic inspection equipment, 100% inspection has recently drawn increased attention. Consider such an inspection plan, where all the outgoing items are subject to inspection by variables. If the inspection result indicates that an item fails to meet the predetermined specification limits, the item is rejected and scrapped. It is well known that imprecision (error) often occurs in inspection, and the level of inspection precision may affect the cost of inspection as well as the decision on the disposition of the items. Hence the determination of an inspection precision level should be based on a balance of inspection cost and economic loss incurred by the decision error. In this paper we develop a model for determining the most economical inspection precision level for 100% inspection. Three costs are considered in the model: quality cost, rejection cost, and inspection cost, which is assumed to be a linear function of the inspection precision level. The optimal inspection precision level and inspection limits of the complete inspection plan are determined by minimizing the sum of these three costs.