The Desired Target Quality Characteristic of a Product of Hanson

question 141

Multiple Choice

The desired target quality characteristic of a product of Hanson Component Manufacturing is 0.500. The customer-service manager knows that customers are likely to complain when the specification is off the desired quality characteristic by more than 0.025. On average, it costs the firm $2,000 to handle and resolve each complaint. The production manager of the Hanson Manufacturing suggests that the company test the product more thoroughly before shipping. The cost of additional testing and adjustments is estimated at $30.00 per unit.

Assume that based on the company's cost information, tolerance is set at 0.0009. What should the target specification ("target specs") for the product be, to four decimal places?

• A) 0.025 +/− 0.0300
• B) 0.025 +/− 0.0090
• C) 0.500 +/− 0.0300
• D) 0.500 +/− 0.0009
• E) 0.500 +/− 0.0081

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Definitions:

Holding Costs

The expenses associated with storing inventory, including warehousing, insurance, depreciation, and opportunity costs of keeping stock.

Decoupling Function

describes the practice of separating different parts of a production process so that a delay or failure in one area does not directly impact another, enhancing flexibility and reliability.

Quantity Discount Problem

A pricing strategy issue where the cost per item lowers as the quantity purchased increases, necessitating analysis for optimal purchasing decisions.

Setup Cost

The expenses incurred to prepare equipment, machinery, or a production line for the manufacture of a new batch of goods.