Questions

1 A manager states that his process is really working well. Out of 1.500 parts. 1,477 were produced free of a particular defect and passed inspection. Based on Six Sigma theory, how would you rate this performance, other things being equal?

2 A company currently using an inspection process in its material receiving department is try¬ing to install an overall cost reduction program. One possible reduction is the elimination of one inspection position. This position tests material that has a defective content on the aver¬age of 0.04. By inspecting all items, the inspector is able to remove all defects. The inspector can inspect 50 units per hour. The 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.

a. Should this inspection position be eliminated?

b. What is the cost to inspect each unit?

c. Is there benefit (or loss) from the current inspection process? How much?

3 A metal fabricator produces connecting rods with an outer diameter that has a I ± .01 inch specification. A machine operator takes several sample measurements over time and determines the sample mean outer diameter to be 1.002 inches with a standard deviation of .003 inch.

a. Calculate the process capability index for this example.

b. What does this figure tell you about the process?

Question

1 You are curious as to how much Rhonda and Steve made in their business last year. You do not have all the data, but you know that most of their expenses re¬late to buying the sweaters and having them mono¬grammed. You know they paid themselves $50,000 each and you know the rent, utilities, insurance, and a benefit package for the business was about $20,000. About how much do you think they made "before taxes" last year? If they must make their payment to the venture capital firm, and then pay 50% in taxes, what was their increase in cash last year?

2 What was your reasoning behind using the aggregate demand forecast when determining the size of your order rather than the individual school forecasts? Should you rethink this or is there a sound basis for doing it this way?

3 How many sweaters should you order this year? Break down your order by individual school. Document your calculations in your spreadsheet. Calculate this based on the aggregate forecast and also the forecast by in-dividual school.

4 What do you think they could make this year? They are paying you $40.000 and you expect your benefit package addition would be about $1,000 per year. As¬sume that they order based on the aggregate forecast.

5 How should the business be developed in the future? Be specific and consider changes related to your sup¬plier, the monogramming subcontractor, target cus¬tomers. and products.