Problem 3.

Burger Doodle is a fast-food restaurant that processes an average of 680 food orders each day. The average cost of each order is $6.15. Four percent of the orders are incorrect, and only 10% of the defective orders can be corrected with additional food items at an average cost of $1.75. The remaining defective orders have to be thrown out.

1. Compute the average product cost.
2. In order to reduce the number of wrong orders, Burger Doodle is going to invest in a computerized ordering and cash register system. The cost of the system will increase the average order cost by $0.05 and will reduce defective orders to 1%. What is the annual net effect of this quality improvement initiative?
3. What other indirect effects on quality might be realized by the new computerized order system?