Busn 6110 Week 4

5(a) Your company currently using an inspection process in its materials receiving department is trying to initiate an overall cost reduction program. One possible reduction is the elimination of one of the inspection positions. This position tests materials that have a defective content on the average of 0.04. By inspecting all items the inspector is able to remove all defects. The inspector can inspect 50 units per hour. Hourly rate including fringe benefits for this position is $9. If the inspection position is eliminated, defects will go into product assembly and will have to be replaced later at a cost of $10 each when they are detected in final Product testing.

Should this inspection be eliminated? Why or Why not?

First calculate the Expected cost of Defects if not inspected

= Probability of defects*Cost of each defect

=0.04*10=$0.40

Then calculate the expected cost of defect removal if inspector is there

=Cost of inspector / no of units inspected

=$9/50 = $0.18

Compare the two costs. The option of having the inspector is better as it cost $0.18 only as compared to $0.40.

Do not eliminate the inspector.

5(b) SystemTel produces radios for Elmora County’s fire department, Intron Computers produces the chips in the radios. Intron produces thechips to an AQL of 3 percent defectives and is willing to run a 5 percent risk of having lots of more defectives or lower rejected. SystemTel considers lots of 7 percent or more defectives unacceptable and wants to ensure that it will accept such poor quality lots no more than 10 percent of the time. The company has decided to use 3 sampling plans.

i. How many units (n) should be contained in each sample and what should be the acceptance number (c) in arriving at 3 acceptable sampling plans (in an attempt to determine the quality of the 1000 units just delivered.

%age of defects coming = p1 = AQL= 3%

%age of defects acceptable by consumer = p2=LTPD=7%

Calculate...