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Question 7
Define the concept of quality costs and discuss how the concept can be used for guiding quality
improvement initiatives in firms’ operations
Question 13
A company makes a product which consists of five different components. Component C is made of
one unit of D, four units of E, and three units of B. Component B comprises of three units of
component D and two units of component F. Component D requires one unit of component E. The
final product A requires one unit of component C and two units of component B.
To make product A, and components B, E, and F requires two weeks lead time. Component C takes
one week lead time, while component D requires three weeks lead time. Only component C uses lotfor-lot sizing, while product A uses lot size of 20 units, component B uses lot size of 40 units,
component D uses lot size of 160 units, and both component E and F use lot size of 50 units20,
while it already has a ready stock of 5 units. At the same time components E, D, and B have
beginning inventories of 100, 100, and 10 units respectively. Components C and F have no
beginning inventory. The company is also scheduled to receive delivery of 10 units of components A
from its subcontractor in Week 3. The suppliers also have scheduled their delivery for components
B (20 units in Week 7), components E (60 units in Week 2), and components F (40 units in Week 5).
Construct Master Production Scheduling for the above order, and calculate the total lead time of
the above production scheduling.
Question 16
A budget-chain hotel has a capacity of 100 rooms. Customers need to book the room of the hotel
prior to their arrival. The hotel has a 24-hour cancellation policy which has penalty cost to
customers. The past years record shows on average of 15 customers make cancellations per day
with standard deviation of 5 customers which result in a loss of sale of the hotel room. The hotel
room’s rate is $100 per day, and considering the risk of cancellation, the hotel’s manager consider
to take a risk by overbooking customer and prepare a compensation of two days of staying free in
the hotel. You are asked to help the manager to estimate how many rooms the manager should
overbooked considering the above situation?
Question 20
A stationery shop wants to set up the inventory control for pen product which costs $3.80. The
ordering cost from supplier is $45 per order with a lead time of two weeks, and the annual
inventory holding cost is 20% of the product’s cost. The average annual demand is 15,000 units and
the standard deviation of the weekly demand is around 71 units.
a. Determine the economic order quantity of the product
b. Calculate the annual total costs of inventory of the product.
c. If the shop desires to achieve a service level of 95% for the product, how many safety stock it
should keep, and how many the quantity of the reorder point for the product?
d. If the shop wants, to reduce the safety stock by half, how that would impact on service level and
reorder point?
Question 23
An electronic company sets to use control chart for controlling its manufacturing processes. The
operator collected the sample below within eight hours.
Construct the control chart for the above process, (under statistical control). Given the precision of
the measurement, use 3 decimal points in your calculation, and assess whether the process is stable
Question 25
The Good Snack Company sells potato chips in bags. The order from customers requests that the
bags should weigh at 300 grams with tolerance of ± 3%. They also accept the delivery batch of
products so long the defect rate (products that fall outside the tolerance limit) does not exceed 1%.
The company has set up a packaging process, and after careful repeated observations, it finds that
the packaging machine perform with the centre of the distribution of 304 grams with standard
deviation of 2 grams.
a. Calculate Cp and Cpk of the process; is the company capable of meeting the requirements of the
customers?
b. Is there anything the company can do to improve its profit in this situation? Explain your answer
and show the calculation.
day with standard deviation of 5 customers which result in a loss of sale of the hotel room.
The hotel room’s rate is $100 per day, and considering the risk of cancellation, the hotel’s
manager consider to take a risk by overbooking customer and prepare a compensation of two
days of staying free in the hotel. You are asked to help the manager to estimate how many
rooms the manager should overbooked considering the above situation?
Question 6 (4 points)
A stationery shop wants to set up the inventory control for pen product which costs $3.80.
The ordering cost from supplier is $45 per order with a lead time of two weeks, and the
annual inventory holding cost is 20% of the product’s cost. The average annual demand is
15,000 units and the standard deviation of the weekly demand is around 71 units.
a. Determine the economic order quantity of the product
b. Calculate the annual total costs of inventory of the product.
c. If the shop desires to achieve a service level of 95% for the product, how many safety
stock it should keep, and how many the quantity of the reorder point for the product?
d. If the shop wants, to reduce the safety stock by half, how that would impact on service
level and reorder point?
Question 7 (3 points)
An electronic company sets to use control chart for controlling its manufacturing processes.
The operator collected the sample below within eight hours.
Sample
number
1 2 3 4 5
1 0.486 0.499 0.493 0.511 0.481
2 0.544 0.549 0.552 0.525 0.529
3 0.496 0.500 0.515 0.488 0.521
4 0.495 0.506 0.483 0.487 0.489
5 0.472 0.502 0.526 0.469 0.481
6 0.473 0.495 0.507 0.493 0.506
7 0.495 0.512 0.49 0.471 0.504
8 0.569 0.574 0.498 0.474 0.485
9 0.497 0.501 0.517 0.506 0.516
10 0.495 0.505 0.516 0.511 0.497
11 0.495 0.482 0.468 0.492 0.492
12 0.483 0.459 0.526 0.506 0.522
13 0.521 0.512 0.493 0.525 0.51
14 0.487 0.521 0.507 0.501 0.5
15 0.493 0.516 0.499 0.511 0.513
16 0.473 0.506 0.479 0.48 0.523
17 0.477 0.485 0.513 0.484 0.496
18 0.515 0.493 0.493 0.485 0.475
19 0.511 0.536 0.486 0.497 0.491
20 0.509 0.49 0.47 0.504 0.512
Construct the control chart for the above process, and assess whether the process is stable
(under statistical control). Given the precision of the measurement, use 3 decimal points in
your calculation.

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Question 7

The concept of quality cost aims to quantify the total cost of quality-related efforts and deficiencies. This can be used in analyzing quality-related data and using the feedback from the data and its analysis to improve processes to provide better quality services. There are a variety of tools that managers, team leaders and staff many find useful in improving processes to improve quality, for example, flow charts, Pareto analysis, fishbone diagrams, benchmarking....