RELIABILITY (1 Point per question)

A certain company produces 10,000 tables per year in a three-step process. The three steps in the process employ machines with the reliabilities listed here:

Step A - 0.987 Step B 0.979 Step C 0.915

1. What is the reliability of the present process? Provide reliability to three digits.

2. How many defects does this process presently produce annually? Round up to get a whole number.

3. If the cost per defective unit is $67.00, what is the annual cost of defects to the company at this time?

4. The company can choose to buy a back-up machine for Step C for an additional $20,000. The back-up would also have a reliability of 0.915, just like the one that is presently used. If they decide to get this back-up machine, what will the new reliability of the system be? Assume that once a machine malfunctions, the process continues to produce product, acceptable and defective. Use THREE decimal places in you calculations.

5. With the back up in place, how many defects will the process produce annually given the same demand rate?

Round up to get a whole number.

6. How much do they stand to save this year if the cost of the back-up machine is included in your calculation? Remember to include the cost of the back-up into your calculations.