BU375 - Practice Problem Set #1

SOLUTIONS

1-1. The Kingston store is the most productive.

Store Hamilton Kingston London Waterloo

Sales volume $40,000 $12,000 $60,000 $25,000

Labour hours 250 60 500 200

Productivity 40k/250 = 12k/60 = 60k/500 25k/200 =
$160 $200 = $120 $125

2-1. a. Failure costs as percentage of quality costs:

39.1 + 118.6 = 157.7 ; 3.2+26.3+39.1+118.6 = 187.2

2009: 157.
7 = 0.8424, or 84.24%
187.
2

2010: 161.
8 = 0.8022, or 80.22%
201.
7

2011: 153.
6 = 0.7228, or 72.88%
212.
5

2012: 127.
2 = 0.6560, or 65.6%
193.
9

2013: 97.
3 = 0.5830, or 58.3%
166.
9
The failure costs decrease as a percentage of total quality costs. This may be attributed to an
increase in product monitoring and inspection. Fewer defective products are reaching the
consumer, as evidenced by the sharp decline in external failure costs.

b.
Prevention costs as % of quality costs: Appraisal costs as % of quality costs
3.2 26.3
Year 1: = 0.0171, or 1.71% = 0.1404, or 14.04%
187.2 187.2

10.7 29.2
Year 2: = 0.0530, or 5.3% = 0.1448, or 14.48%
201.7 201.7

28.3 30.6
Year 3: = 0.1332, or 13.32% = 0.144, or 14.4%
212.5 212.5

42.6 24.1
Year 4: = 0.2197, or 21.97% = 0.1243, or 12.43%
193.9 193.9

50 19.6
Year 5: = 0.2996, or 29.96% = 0.1174, or 11.74%
166.9 166.9

The increase in prevention costs as a percentage of total quality costs indicates that Backwoods Canada
is placing more emphasis on prevention of defects rather than correction of them. Perhaps they are
spending more in the areas of quality planning, product design, process, training, and information. This
is contributing to a decline in the need for inspection and testing, equipment testing, and operators to
test quality; thus appraisal costs decline, both absolutely and as a percentage of total costs. Prevention
also contributes to the decline in external and internal failures, because fewer defective products are
produced to begin with. Increases in prevention expenditures will result in a decrease in all other
quality costs.

c.

Quality Sales Index Quality-Cost Index

Year
6.93 44.48
Year
7.50 47.64
Year
7.85 50.04
Year
6.9 44.46
Year
5.79 38.32

These index values do not provide much information regarding the effectiveness of the quality
assurance program. They are, however, useful in making comparisons from one period to the next and
in showing trends in product quality over time.

d. Examples of quality-related costs:

• Prevention: Market research, that is, producing what consumers want; purchasing only high-
quality down and other materials, designing an efficient and effective manufacturing process;
training employees in making quality products.
 • Appraisal: Inspection of raw materials, work-in-process, and finished product; equipment testing
(pattern cutter, sewing machines, etc.), inspection.
• Internal failure: Wasted materials and labour, defective products discovered during inspection,
use of inefficient processes, equipment downtime, poorly trained employees.
• External failure: Defective products, customer complaints, warranty costs, lost sales, loss of good
will.

2-3. a.
y  I %G   I 1  %G%R
 1500.83 1501 0.830.60

 139.8 file cabinets

b. 145  150%G 1501%G0.60

145  150G 150 150G0.60

145  150G  90  90G

55  60G

2-4.
Cabinets to be reworked: R=150 (1−0.83 ) ( 0.6 ) =15.3
Yield: 139.8 cabinets (from Q2.3)

$ 27 (150)+ $ 8 (15.3)
Cost = = $29.85 per cabinet when quality is 83%
139.8

Note: if you round down and only account for complete cabinets, $30 instead of $29.85

$ 27 (150)+ $ 8 (15)
Cost = = $30 per cabinet when quality is 83%
139

If quality increases to 90%:

R=150 (1−0.9 ) ( 0.6 ) =9
Y =150∗0.9+ ¿ R = 144
 27 150 
4,122
Cost 89 
144 144

 $28.63 per cabinet if quality is 90%

453
3- p  0.151;
1.

30100
p 1 p  0.1510.849
 n 
100
 0.0358

p 1 p 
UCL  p  z
n

 0.151 0.1510.849
3  0.258
100

p 1 p 
LCL  p  z
n
0.1510.849  0.044
 0.151
100
3

The process does not seem to be out of control, although the decreasing number of defects from
sample 8 to sample 17 should probably be investigated to see why the steady improvement occurred;
likewise, the steadily increasing number of defects from sample 17 to sample 25 should be
investigated to see why the quality deteriorated.
 3-5. a. 742
c  24.73
30
UCL  c  z c
 24.73  3 24.73
 39.65
LCL  c  z c
 24.73  3 24.73
 9.81

With three points outside the control limits, the process appears to be out of control.

b. Nonrandom factors that might cause the process to move out of control could include
(among other things) problems with the telephone order system, inexperienced
operators taking orders, computer system problems, or shipping problems and
3- delays.
11.

Sample x R
1 1.84 2.3
2 2.08 2.6
3 2.92 2.7
4 1.78 1.9
5 2.70 3.2
6 3.50 5.0
7 2.84 2.2
8 3.26 4.6
 9 2.50 1.3
10 4.14 3.5
11 2.12 3.0
12 4.38 4.0
13 2.84 3.3
14 2.70 1.1
15 3.56 5.6
16 2.96 3.1
17 3.34 6.1
18 4.16 2.4
19 3.70 2.5
20 2.72 2.9
60.04 63.3

R-chart
D3  0, D4  2.11, for n  5
UCL  D4R  2.113.17 
6.69 LCL  D3R  0 3.17 
0
There are no R values outside the control limits, which would suggest the process is in
control.

x -chart
A2  0.58

There are no x values outside the control limits, which suggests the process is in control.
3-17.

Sample x Sample x
1 6 . 60 11 3 . 98
2 4 . 24 12 4 . 30
3 2 . 88 13 6 . 10
4 4 . 70 14 3 . 22
5 3 . 90 15 2 . 54
6 5 . 46 16 3 . 12
7 4 . 14 17 4 . 38
8 4 . 80 18 4 . 80
9 5 . 32 19 3 . 44
10 3 . 88 20 3 . 88

From Table 3.1, A  0.58.

2
 X bar
7.00
6.00
5.00
4.00
3.00
2.00
1.00
Mean

0.00
123456789 10 11 12 13 14 15 16 17 18 19 20

The process appears to be in control, with sample 1 seeming to be an aberration, however, the
process should still be checked.

3-28.

While the process appears to be in control, the mean of 7.28 appears to be significantly lower
than the objective of 8 chips per cookie that management has established. Thus, the company
should adjust their process to increase the number of chips and construct a new control chart.

3-33. x  7.28, R  4.25

3  A2 R = 0.584.25  2.47
4 4
C p= = =0.81
2(2.47) 4.94
 C pk =minimum
[
7.28−6 10−7.28
2.47
,
2.47 ]
C pk =minimum [ 0.52 , 1.10 ]
C pk =0.52

The process is not capable of meeting the design specifications and it appears that cookies will be
produced with too few chips.