Cost Management 6th Edition by Edward Blocher,David Stout ,Paul Juras,Gary Cokins

Exercise 10

Taguchi Loss Function Analysis (Appendix) Duramold specializes in manufacturing molded pla tic panels to be fitted on car doors. The blueprint specification for the thickness of a high-demai model calls for 0.1875 ± 0.0025 inch. It costs $120 to manufacture and $150 to scrap a part that do not meet these specifications. The thickness measure for the unit just completed is 0.1893 inch.
Required
1. Use the Taguchi Loss Function, L( x ), to determine:
a. The value of the cost coefficient, k
b. The amount of loss for the unit, L ( x = 0.1893)
2. Assume that Duramold can eliminate the uneven thickness by adding a production worker, at the critic
production point, for $6 per unit. Under this assumption:
a. At what tolerance should the panels be manufactured Show calculations.
b. What should be the production specification for these panels