Pandra Manufacturing Specifies the Quality Characteristic of One of Its

question 119

Multiple Choice

Pandra Manufacturing specifies the quality characteristic of one of its popular products to be 0.500" ±0.020. An analysis of company records for the last two years suggests that the average cost for warranty repair or replacement is $125.00 per unit. The customer service manager believes that the product is likely to fail during the warranty period when the quality characteristic exceeds on either side of the target of 0.500 the tolerance of 0.020.

Using a Taguchi quality loss function (QLF) for this company, what is the amount of the estimated loss (to four (4) decimal places) when the actual quality characteristic, x, is 0.505?

• A) $0.3906.
• B) $7.8125.
• C) $19.5313.
• D) $125.0000.
• E) $1,562.5000.

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Definitions:

Break-even Points

The level of production or sales at which total revenues equal total expenses, resulting in no net profit or loss.

Common Fixed Expenses

These are fixed costs that do not vary with the volume of production or sales, such as utilities, rent, or administrative salaries, shared across different products or departments.

Variable Costing

An accounting method that considers only variable costs as product costs and treats fixed costs as period costs to be charged in full against the current period's revenue.

Direct Labor Cost

The expense associated with employees who are directly involved in the production process.