Submitted by: Submitted by csucsii
Views: 67
Words: 2004
Pages: 9
Category: Business and Industry
Date Submitted: 12/18/2014 11:22 PM
THE
ASSIGNMENT
IS
DUE
ON
THE
November
21
BEFORE
CLASS
LATE
SUBMISSION
MAY
NOT
BE
ACCEPTED
OR
SUBJECT
TO
PENALTIES
Operations
Management
Fall
2014
Assignment
3–
Quality
Management
Note:
It
is
encouraged
to
use
Excel
to
do
the
calculations,
however
you
have
to
state
explicit
your
calculation
steps
and
out
the
result.
Electronic
copy
is
not
accepted.
1. A company currently using an inspection process in its material receiving department is trying to install an overall cost reduction program. One possible reduction is the elimination of the inspection position. This position tests material that has a defective content on the average of 0.05. By inspecting all items, the inspector is able to remove all defects. The inspector can inspect 60 units per hour. The hourly cost of this position is $10. If the inspection position is eliminated, defects will go into product assembly and will have to be replaced later at a cost of $25 each when they are detected in final product testing.
(2
x
10
points)
a) What
is
the
cost
of
inspecting
each
unit?
$0.1667 per unit. Inspection of 60 units cost $10 (since hourly wage of the inspector is $10 and he can inspect 60 units an hour), the cost of inspecting each unit must be $10/60, $0.1667. b) Does
this
position
increase
or
decrease
the
overall
cost
of
quality?
By comparing the price of inspecting and not inspecting (replacing), we can see that the inspection decreases the cost of quality, thus benefiting the company, by $1.0833 per unit. Replacing a defective unit costs the company $25 – and since 5% of the units are defective, the cost is average $1.25 per every unit....