The Colonial House Furniture Company manufactures four-drawer oak filing cabinets in six stages. In the first stage, the boards forming the walls of the cabinet are cut; in the second stage, the front drawer panels are woodworked; in the third stage, the boards are sanded and finished; in the fourth stage, the boards are cleaned, stained, and painted with a clear finish; in the fifth stage, the hardware for pulls, runners, and fittings is installed; and in the final stage, the cabinets are assembled. Inspection occurs at each stage of the process, and the average percentages of good-quality units are as follows.
Stage.......Average Percentage of good quality
.......1..............87%
.......2..............91%
.......3..............94%
.......4..............93%
.......5..............93%
.......6..............96%
The cabinets are produced in weekly production runs with a product input for 300 units.
The Colonial House Furniture Company has investigated the manufacturing process to identify potential improvements that would improve quality. The company has identified four alternatives, each costing $15,000, as follows.
Alternative 1: Only Stage 1 quality improves to 89%.
Alternative 2: Stage 2 quality improves to 94% and Stage 4 quality improves to 97%. All the other quality percentages remain the same.
Alternative 3: Stage 5 quality improves to 96% and Stage 4 quality improves to 97%. All the other quality percentages remain the same.
Alternative 4: Only Stage 2 quality improves to 96%
Keep two decimal point in all your calculations and when you report the yield.
What is the yield if the company chooses to go with Alternative 1?
What is the yield if the company chooses to go with Alternative 2?
What is the yield if the company chooses to go with Alternative 3?
What is the yield if the company chooses to go with Alternative 4?
Which alternative would be the most cost effective?
Alternative 1
Alternative 2
Alternative 3
Alternative 4