Question

Your quality control manager has identified the four major problems, the extent to which each one occurs (i.e., the probability that this problem occurs per item produced), and the cost of reworking to fix each one (see Table 7.6.5). Assume that only one problem can occur at a time.
a. Compute the expected rework cost for each problem separately. For example, the expected rework cost for “broken case” is 0.04 × 6.88. Compare the results and indicate the most serious problem in terms of expected dollar costs.
b. Find the overall expected rework cost due to all four problems together.
c. Find the standard deviation of rework cost (don’t forget the nonreworked items).
d. Write a brief memo, as if to your supervisor, describing and analyzing the situation.

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