The factory ordered 5,500 units of raw material from the supplier. The product requires three processing steps (screening, drilling, and assembling). The first-pass yields (proportion conforming) for each operation are given by p1 = 89%, p2 = 97%, and p3 = 91.5%, respectively. The unit production costs for each operation are u1 = $0.05, u2 = $3.5, u3 = $18, respectively. (a) How many acceptable products will be produced? What is the unit cost per conforming product?

(b) Suppose, through quality improvement efforts, the first-pass yield for each operation is improved to the following levels: p1 = 99.95%, p2 = 99.5%, and p3 = 99.5%, How many acceptable products will be produced? What is the unit cost per conforming product? Relative to part (a), determine how much improvement in capacity has taken place. (c) Management is contemplating a 100% inspection process after each operation. Assume that the inspection process is completely reliable. Unit inspection costs after operations 1, 2, and 3 are $0.01, $0.22, and $0.58, respectively. Nonconforming parts are not forwarded to subsequent operations. Find the unit cost per conforming product for the improved process.