17-43 Using a Taguchi Quality Loss Function (QLF) to Determine Tolerance The desired distance for Flextronchip customers is 0.2 mm between two adjacent pins. Any deviation from this value causes interference. The process of handling complaints costs the firm at approximately $40.00 per chip. The engineers of the firm expect the average customer will be likely to complain when the distance is off target by at least 0.0001 mm. At the factory, the adjustment can be made at a cost of $1.60, which includes the labor to make the adjustment and additional testing. Required 1. What is the value of k, the cost coefficient, in the Taguchi quality loss function (QLF) based on the above data? 2. Based on a Taguchi quality loss function (QLF), what should the tolerance be (to 5 decimal places) before an adjustment is made at the factory? 17-50 cost-of-Quality Improvement-Relevant Cost Analysis PIM Industries Inc. manufactures electronics components. Each unit costs $30 before the final test. The final test rejects, on average, 5% of the 50.000 units manufactured per year. The average rejection rate of the industry is 3%. A consultant has determined that poor lighting is the most likely cause of this high rejection rate. It would cost $100,000 to install adequate lighting in the assembly department, which would be useful for 5 years. With adequate lighting (which will cost an additional $5,000 of operating costs per year), the firm expects to reduce its rejection rate to no higher than the industry average. Required 1. Should the firm install the lighting? That is, what would be the projected five-year impact on operating profit? (Show calculations.) 17-43 Using a Taguchi Quality Loss Function (QLF) to Determine Tolerance The desired distance for Flextronchip customers is 0.2 mm between two adjacent pins. Any deviation from this value causes interference. The process of handling complaints costs the firm at approximately $40.00 per chip. The engineers of the firm expect the average customer will be likely to complain when the distance is off target by at least 0.0001 mm. At the factory, the adjustment can be made at a cost of $1.60, which includes the labor to make the adjustment and additional testing. Required 1. What is the value of k, the cost coefficient, in the Taguchi quality loss function (QLF) based on the above data? 2. Based on a Taguchi quality loss function (QLF), what should the tolerance be (to 5 decimal places) before an adjustment is made at the factory? 17-50 cost-of-Quality Improvement-Relevant Cost Analysis PIM Industries Inc. manufactures electronics components. Each unit costs $30 before the final test. The final test rejects, on average, 5% of the 50.000 units manufactured per year. The average rejection rate of the industry is 3%. A consultant has determined that poor lighting is the most likely cause of this high rejection rate. It would cost $100,000 to install adequate lighting in the assembly department, which would be useful for 5 years. With adequate lighting (which will cost an additional $5,000 of operating costs per year), the firm expects to reduce its rejection rate to no higher than the industry average. Required 1. Should the firm install the lighting? That is, what would be the projected five-year impact on operating profit? (Show calculations.)
