Suppose a quality manager is to make a decision between two manufacturing processes for the manufacture of a certain component. Process A costs 150 dollars per unit to manufacture a component. Process B costs 160 dollars per unit to manufacture a component. Components have an exponential time to failure distribution with mean time to failure of 300 hours for process A, while components from process B have a mean time to failure of 350 hours. Because of a warranty clause, if a component lasts less than 400 hours, the manufacturer must pay a penalty of 75 dollars. Based on the expected cost, would the quality manager select Process A? Explain why or why not? Show your work.

Suppose a quality manager is to make a decision between two manufacturing processes for the manufacture of a certain component. Process A costs 150 dollars per unit to manufacture a component. Process B costs 160 dollars per unit to manufacture a component. Components have an exponential time to failure distribution with mean time to failure of 300 hours for process A, while components from process B have a mean time to failure of 350 hours. Because of a warranty clause, if a component lasts less than 400 hours, the manufacturer must pay a penalty of 75 dollars. Based on the expected cost, would the quality manager select Process A? Explain why or why not? Show your work.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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