1. Your company produces wheel rims for heavy-duty industrial vehicles. Each rim should weigh exactly 550 lbs. Weights as low as 544 lbs. and as high as 552 lbs. are acceptable. In 2017, the average weight of a wheel rim was 549 lbs. with a standard deviation of 0.75 lbs. What are the 3 standard deviation Cpk statistics for the upper and lower specification limits? What do these values tell you? The CEO intends to launch a new quality initiative which implies the use of six sigma-level quality when evaluating the process. How would this change your results?
2. A company is selecting among three alternative capacity plans. The first alternative is a job shop with low fixed costs ($125,000), but with highly skilled labor higher variable cost per unit ($25). The second alternative is a form of cellular manufacturing with fixed cost of $275,000 and variable cost of $18 per unit. The third consideration is a product layout. This will cost $550,000 to set up, but result in a variable cost of only $12.50 per unit. Which layout should be selected at the following volumes (a) 10,000? (b) 20,000? (c) 30,000?
3. A beverage supply company is trying to determine the appropriate stocking level for an upcoming festival to be held in town. Based on historic data, the company predicts that there is a 25% chance that the festival will attract 18,000 customers (small); a 45% chance that it will attract 35,000 (medium); a 15% chance that it will attract 50,000 (large); and a 15% chance it will attract 80,000 (huge). Assuming that each customer represents one sale of $8, what is the expected value of the festival for the company?