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OM5 C15 IM
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
9
4. Find two examples similar to the Intel box in this chapter that describe the economic
consequences of poor quality.
A Google search on “economic impact of poor quality” results in over 17 million hits.
5.* A bank has set a standard that mortgage applications be processed within a certain
number of days of filing. If, out of a sample of 2,500 applications, 85 fail to meet this
requirement, what is the epmo metric and what sigma level does it correspond to?
85 errors per 2,500 opportunities is equivalent to 34,000 epmo. This is a sigma level
of 3.32, using the formula NORMSINV (1 – 85/2,500) + 1.5 = 1.82 +1.5 = 3.32, far
6.* Over the last year, 1,800 injections were administered at a clinic. Quality is
measured by the proper amount of dosage as well as the correct drug. In six
instances, the incorrect amount was given, and in three cases, the wrong drug was
given. What is the epmo metric and what sigma level does it correspond to?
Because each injection has two different opportunities for error, there are a total of
OM5 C15 IM
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
10
It is up to the instructor whether to use and/or explain the use of the Excel function
7. Provide some specific examples of quality costs in a fast-food operation or in the
operation of your college or university. Classify the costs into the four major
categories described in the chapter.
Quality costs can be organized into four major categories: prevention costs, appraisal
costs, internal-failure costs, and external-failure costs. Prevention costs are those
expended to keep nonconforming goods and services from being made and reaching
Appraisal: double-checking food orders or student course choices to ensure they
Internal-failure: discarding a food order that is prepared wrong before handing it
External failure: re-doing a food order if the wrong item was given to a customer;
8. The following list gives the number of defects found in 30 samples of 100 electronic
assemblies taken on a daily basis over one month. Plot these data on a run chart,
computing the average value (center line). How do you interpret the chart?
OM5 C15 IM
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
11
The average is 4.3. The chart shows an unusual spike at observations 21 and 22,
which may be indicative of a special cause, even without calculating control limits.
9. Develop cause-and-effect diagrams for any one of the following problems:
a. poor exam grade
There is no one correct answer for these diagrams but you will find some student
diagrams to be quite good. This assignment allows students to apply quality
10. Find two examples (different from the ones in this chapter) of how check sheets have
been applied in an organization.
A Google search results in about 79,000 hits on the term “check sheets.” A quick
review of some of these hits include the following using check sheets: universities
0
2
4
6
8
10
12
14
16
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29
OM5 C15 IM
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
12
11.* Analysis of customer complaints at an e-commerce retailer revealed the following:
Billing errors 537
Shipping errors 2,460
Construct a Pareto diagram and discuss the conclusions you may draw from it.
Using the Excel template Pareto, we obtain:
We see that shipping delays (55% of errors) and shipping errors (25%) account
12.* Classify the following cost elements into the appropriate cost of quality
categories, prepare a Pareto chart for the categories, interpret the results, and
provide recommendations.
Cost Element Amount
Customer complaint remakes $ 28,000
OM5 C15 IM
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
13
Printing plate revisions 28,000
450,000
Quality planning 57,000
Cost classification:
Customer complaint remakes EXTERNAL FAILURE $ 28,000
Printing plate revisions INTERNAL FAILURE 28,000
Quality improvement projects PREVENTION 14,000
Gauging APPRAISAL 100,000
Total Prevention costs: $71,000
Total Appraisal costs: $592,000
OM5 C15 IM
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
14
Although external failure costs are relatively small, the company is incurring
13.* The following cost of quality data were collected at the installment loan
department of the Kenney Bank. Classify these data into the appropriate cost of
quality categories and analyze the results. What suggestions would you make to
management?
Loan Processing
1. Run credit checks: $2,675.01
2. Review documents: $3,000.63
3. Make document corrections; gather additional information: $1,032.65
4. Prepare tickler file; review and follow up on titles,
Loan Payment
OM5 C15 IM
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly
accessible website, in whole or in part.
15
Loan Payoff
1. Receive, inspect, and process payoff and release documents: $224.99
2. Research payoff problems: $15.35
Classification:
Credit checks Appraisal $2,675.01
Review documents Appraisal $3,000.63
Make corrections Internal failure $1,032.65
Prepare tickler file Appraisal $155.75
Total Prevention costs: $1,500
