XXX Companys SS manufacturing process has been producing an unfavorable variance of $2,080 each week for the last two weeks. If the company decides to investigate the variance, it would cost $1,500. During the investigation, the company would lose production

XXX Company’s SS manufacturing process has been producing an unfavorable variance of $2,080 each week for the last two weeks. If the company decides to investigate the variance, it would cost $1,500. During the investigation, the company would lose production of 200 units. If the process is out of control, it would cost $2,500 to correct the process and the company would lose production of another 300 units. These units have a selling price of $16 and outlay costs of $7 to manufacture.

The next scheduled maintenance will be in four weeks. At that time, the overhaul will cost $5,000. If the variance is investigated now, the maintenance will take place in four weeks as scheduled, however the cost of the maintenance will be reduced by $900.

Required:

a) Assuming the probability of the line being out of control is estimated at 40%, should Acme investigate the process now? Solve using a decision table – draw table on next page.

b) What would Acme pay to know, with certainty, whether the line is in or out of control? 

• Expert Answer

Yes Control charts are used to routinely monitor quality Depending on the number of process characteristics to be monitored there are two basic types of control charts The first referred to as a univa View the full answer