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Boston Electric Generators has been getting many complaints from its major customer, Home Station, about the quality of its shipments of home generators. Daniel Shimshak, the plant manager, is alarmed that a customer is providing him with the only information the company has on shipment quality. He decides to collect information on defective shipments through a form he has asked his drivers to complete on arrival at customers’ stores. The forms for the first 279 shipments have been turned in. They show the following over the past 8 weeks:

Even though Daniel increased his capacity by adding more workers to his normal contingent of 30, he knew that for many weeks he exceeded his regular output of 30 shipments per week. A review of his turnover over the past 8 weeks shows the following:

a) Develop a scatter diagram using total number of shipments and number of defective shipments. Does there appear to be any relationship?

b) Develop a scatter diagram using the variable “turnover”(number of new hires plus number of terminations) and the number of defective shipments. Does the diagram depict a relationship between the two variables?

c) Develop a Pareto chart for the type of defects that have occurred.

d) Draw a fish-bone chart showing the possible causes of the defective shipments.

 
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Rosters Chicken advertises “lite” chicken with 30% fewer calories than standard chicken. When the process for “lite” chicken breast production is in control, the average chicken breast contains 420 calories, and the standard deviation in caloric content of the chicken breast population is 25 calories.

Rosters wants to design an -chart to monitor the caloric content of chicken breasts, where 25 chicken breasts would be chosen at random to form each sample.

a) What are the lower and upper control limits for this chart if these limits are chosen to be  standard deviations from the target?

b) What are the limits with three standard deviations from the target?

 
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Ski Boards, Inc., wants to enter the market quickly with a new finish on its ski boards. It has three choices: (a) Refurbish the old equipment at a cost of $800, (b) make major modifications at a cost of $1,100, or (c)  purchase new equipment at a net cost of $1,800. If the firm chooses to refurbish the equipment, materials and labor will be $1.10 per board. If it chooses to make modifications, materials and labor will be $0.70 per board. If it buys new equipment, variable costs are estimated to be $0.40 per board.

a) Graph the three total cost lines on the same chart.

b) Which alternative should Ski Boards, Inc., choose if it thinks it can sell more than 3,000 boards?

c) Which alternative should the firm use if it thinks the market for boards will be between 1,000 and 2,000?

 
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Nagle Electric, Inc., of Lincoln, Nebraska, must replace a robotic Mig welder and is evaluating two alternatives. Machine A has a fixed cost for the first year of $75,000 and a variable cost of $16, with a capacity of 18,000 units per year. Machine B is slower, with a speed of one-half of A’s, but the fixed cost is only $60,000. The variable cost will be higher, at $20 per unit. Each unit is expected to sell for $28.

a) What is the crossover point (point of indifference) in units for the two machines?

b) What is the range of units for which machine A is preferable?

c) What is the range of units for which machine B is preferable?

 
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