Exam 17: The Management and Control of Quality

Heidelberg Manufacturing specifies the quality characteristic for one of its key components to be 154.0" ± 4.0. The cost of failure is estimated to be $8,000 per unit. Using the Taguchi Quality Loss Function (QLF) the firm has estimated the loss, L(x), at the quality characteristic that the firm has experienced, x, to be $4,500. What is the estimated loss (to the nearest dollar) if the deviation from the value of the quality characteristic doubled?

Ladder Manufacturing specifies the quality characteristic of one of its popular products to be 0.400" ± 0.010. An analysis of company records for the last two years suggests that the average cost for warranty repair or replacement is $100.00 per unit. The customer service manager believes that the product is likely to fail during the warranty period when the quality characteristic exceeds on either side of the target of 0.400, by the tolerance of 0.010. What is the cost coefficient, k, for the Taguchi Quality Loss Function (QLF) associated with this situation? Round answer to nearest dollar.

Verizon Manufacturing Company spent $400,000 in 2019 to inspect incoming components. Of the $400,000, $240,000 is fixed appraisal costs. The variable inspection cost is $0.20 per component. It takes two components for each finished product. Internal failure costs average $80 per failed unit of finished goods. In 2019, five percent of all completed items had to be reworked. External failure costs average $200 per failed unit. The company's average external failures are one percent of units sold. The company manufactures all units as ordered and carries no materials inventories. Seeking to decrease its total cost of quality (COQ), Verizon contracted Quality-is-Free Consultants, Inc. (QIFC) to study ways to improve product quality and to reduce costs. Upon completion of the study, QIFC recommended automatic inspection equipment that requires a $60,000 annual cost for training and $150,000 for equipment rental and maintenance. The new equipment will eliminate $40,000 of the fixed appraisal costs, reduce the amount of unacceptable product units in the manufacturing process by 10 percent, and cut product failures by half. The company paid the consulting firm $100,000 in early January 2020 for the project. Verizon expects no changes in its operating level in the foreseeable future. The $100,000 payment to the consulting firm for Cost of Quality (COQ) reporting purposes is best classified as a(n):

Oslo Company's target quality characteristic, T, for one of its key components is set at 82. Using the Taguchi Quality Loss Function (QLF) the company has determined the cost coefficient, k, to be $6,000. What is the estimated loss, L(x), if the value of the quality characteristic, x, is 85? (Round your answer to the nearest dollar.)

As noted in Chapter 17, one approach to setting quality standards is to use a Six-Sigma approach. Required: 1. What is meant by the term "Six Sigma"? 2. The overall process of implementing process-improvement projects is referred to as DMAIC (Define, Measure, Analyze, Improve, and Control). Provide an overview of each stage of the DMAIC specifically within the context of a Six Sigma implementation.

All the following costs are generally included in a Cost-of-Quality (COQ) report except:

The tool that consists of a histogram of factors contributing to a specified quality problem, ordered from the most to the least frequently occurring factor, is a:

Which of the following is not true regarding the determination of relevant costs and relevant revenues associated with quality-related initiatives (such as the move to JIT production)?

Which of the following is not an external nonfinancial measure of quality?

Cycle time efficiency is:

Lean manufacturing principles are derived in large part from the Toyota Production System (TPS). Which of the following is not associated with the TPS?

Studies have shown that improvements in quality can lead to:

Slumberger Manufacturing Co., Inc. is considering a change in its manufacturing layout (e.g., to a flexible manufacturing system [FMS] or cellular manufacturing), but it is unsure of the net benefits it should expect in conjunction with such a move. Company management has asked you to estimate both financial and nonfinancial effects of the proposed move. In this regard, you have collected the following information:Required: 1. Because of the change, inventory carrying costs are expected to change by what amount? (Round your answer to nearest dollar.) 2. If the plant layout change is made, what is the projected incremental manufacturing cost for the year (to the nearest dollar), in terms of out-of-pocket costs? 3. What is the projected net change in operating income (per year) associated with the proposed change? Include both out-of-pocket and opportunity costs in your analysis; round final answer to nearest whole number. 4. What are some plausible nonfinancial performance metrics that the company might monitor after implementing the proposed change?

Which of the following is not a characteristic of the general framework for managing and controlling quality depicted in Chapter 17?

Which of the following would not be expected in response to a move to a Just-in-Time (JIT) production philosophy?

Pandra Manufacturing specifies the quality characteristic of one of its popular products to be 0.500 ± 0.020. An analysis of company records for the last two years suggests that the average cost for warranty repair or replacement is $125.00 per unit. The customer service manager is of the opinion that the product is likely to fail during the warranty period when the quality characteristic differs from the target by more than 0.020 in either direction. Required: To gain a better understanding of the impact of quality variation, you, the product manager, would like to know the following values in a Taguchi Quality Loss Function (QLF), L(x): 1. Cost coefficient, k (rounded to the nearest dollar). 2. Estimated loss, L(x), when the quality characteristic, x, is 0.505. (Round your answer to four decimal places.) 3. Estimated loss, L(x), when the actual quality characteristic, x, is 0.510. (Round your answer to two decimal places.) 4. The amount of change in the estimated loss (or total quality cost) when the deviation from the quality characteristic doubled. What general principle regarding Taguchi Quality Loss Functions is revealed by this example?

Which of the following items is not a tool that can be used by management to detect poor quality in an operation?

The Bulldog Company incurred the following quality-related costs: 2019 2018 Calibration \ 190,000 \1 20,000 Product design 180,000 210,000 Product liability 150,000 90,000 Product recalls 480,000 240,000 Retesting 300,000 240,000 Rework 390,000 120,000 Testing 60,000 180,000 Training 90,000 120,000 Warranty repairs 180,000 90,000 Required: 1. Calculate for each of the two years: ● Total prevention costs ● Total appraisal costs ● Total internal failure costs ● Total external failure costs 2. Provide two recommendations for improving the disclosure of COQ data for the current data set (i.e., providing more informative disclosures). 3. Based on the data in this exercise, and your solution to Requirement 1, what observations can you offer regarding COQ spending over the two-year period?

List and explain three tools that can be used to identify or detect quality problems in a process or operation.

Six Sigma is one approach for setting quality expectations for a given process or output. As pointed out in Chapter 17 of your text, the term "Six Sigma" comes from statistics: in a normal distribution, the area (probability) outside of +/− six (6) standard deviations from the mean value is exceedingly small. You are provided the following values from a standardized normal distribution (i.e., a distribution with a mean of zero and a standard deviation of 1.0): 0.00 0.50000000 1.00 0.15870000 1.50 0.06681000 1.75 0.04006000 2.00 0.02275000 2.50 0.00621000 3.00 0.00135000 3.50 0.00023270 4.00 0.00003169 Note: The Z values in the above table refer to the number of sigmas to the right of center (i.e., to the right of Z = 0). The listed probabilities, p, refer to the area to the right of the chosen Z point, as illustrated by the graph below: Required: 1. Given the above, what is the total probability (area under the curve) corresponding to Z = 0 +/− 1.0 sigma, rounded to two decimal places (e.g., 0.34817 = 34.82%)? How many units (out of 1,000 outputs) would have one or more defects for a process operating at one-sigma performance level? Round your answer to nearest whole number. 2. What is the total probability (area under the curve) corresponding to Z = 0 +/− 3.0 sigma, rounded to two decimal places? How many units (out of 1,000 outputs) would have one or more defects for a process operating at three-sigma performance level? Round your answer to nearest whole number. 3. Under a four-sigma control level, what is the total area in the two tails of the distribution, rounded to six (6) decimal places (e.g., 0.00004169 = 0.00417%). What is the total probability (area under the curve) corresponding to Z = 0 +/− 4.0 sigma, rounded to two decimal places? How many units (out of 100,000 outputs) would have one or more defects for a process operating at four-sigma performance level? Round your answer to nearest whole number. 4. What general conclusion can you draw based on the preceding results?