Spring 2020 ISOM3730 Final Exam Solution

Note: The following only shows the essence of the solution. Typically, you will need more elaboration
and in-depth analysis to score full credit.

(4 pts) Question 1
A company is attempting to change from a Cp of 1 to a Cp of 2. Which of the following is a possible
method?

A. Widen their control limits.

B. Decrease the variation of their process.
C. Spend more money on advertising or inspection.
D. Increase the size of their samples.
E. Reduce the mean of the process.

(4 pts) Question 2
A company is deciding between using an (n, c) sampling plan with n = 10 and c = 1 or a sampling plan
with n = 10 and c = 2. If the sample is rejected, the lot (10,000 goods) undergoes 100% inspection.
Otherwise, the lot is shipped out without inspection. Which of the following is true?

A. The (10,1) plan will have greater costs of inspection and greater external failure costs.
B. The (10,1) plan will have greater costs of inspection and lower external failure costs.
C. The (10,1) plan will have lower costs of inspection and lower external failure costs.
D. The (10,1) plan will have lower costs of inspection and greater external failure costs.
E. Not enough information to tell.

(4 pts) Question 3
Quality function depolyment

A. can be used to improve quality of conformance but not quality of design.

B. can be used to improve quality of design but not quality of conformance.
C. can be used to improve quality of conformance and quality of design.
D. cannot be used to improve either quality of conformance or quality of design.
E. is not known regarding whether it can be used to improve quality of conformance or design.

(4 pts) Question 4
Regarding the service quality framework, which of the following will the use of process capability
analysis benefit the most?

A. Reliability
B. Assurance
C. Empathy
D. Tangibles
E. Responsiveness
(6 pts) Question 5
Due to the outbreak of coronavirus, HKUST has tightened the hygiene standards of all on-campus
catering outlets. Measures including
(1) regular disinfection of the restaurant areas (including cashier, tables, chairs, door handles,
etc) every 2 hours,
(2) provision of hand sanitizers at entrance,
(3) provision of envelope (to contain used masks) upon request,
(4) operating at half capacity and placing tables 1.5 meters apart from each other,
(5) ensuring restaurant employees and customers are wearing masks when they are not eating
or drinking,
(6) checking restaurant employees’ temperature before work, are enforced.

Pick 2 measures and explain how they impact the 5 service quality dimensions.

Tangibles – clean/disinfected tables, utensil, etc.

Reliability – requiring employees to put on masks/measuring temperature before work
Empathy – providing hand sanitizers and envelope upon request

Any reasonable answers.

(16 pts, 4pts each) Question 6

The Spring semester of 2020 has been unprecedented due to the outbreak of coronavirus. As
instructor of ISOM 7330, Professor Gnuehc has been concerned about the teaching quality of the
course. To this end, he had to conduct the following tasks for the course. Which gap(s) does the
followings tackle, respectively? Explain.

a) Attend training sessions of zoom.

Gap 3

b) Redesign the curriculum of the course to fit in the style of online teaching.
Gap 2

c) Spend time to talk to students before the semester to understand their needs due to changes in
the format of classes.
Gap 1

d) Spend more time at the end of zoom class meetings to convey to students what he has done in
class, such as the important points covered and make sure students do not have unanswered
questions.
Gap 4

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(6 pts) Question 7
From the previous question, pick 2 tasks from (b) to (d), explain how they match with Deming’s
14 points of management.

(b) Point 2, adopting new philosophy.

(c) (d) Point 14, Put everybody in the company to work accomplishing the transformation.

Any reasonable answers.

(4 points) Question 8
KME’s grocery production process makes cartons that are normally distributed with a length of 20
inches and a process standard deviation of 1.5 inches. Their customers require that a carton be between
18 and 22 inches long.

a) (4 points) What is the Process Capability index for this process?

Cp = USL-LSL/6sigma = (22 – 18)/(6*1.5) = 0.4444

(6 points) Question 9
Suppose another vendor of CT scanners offer a deal at the same price of 2 million dollars per scanner.
To perform CT scan and CT image reconstruction this scanner requires 14.5 minutes per scan, but at a
cheaper expense of $40 medical supplies cost per scan. Should the hospital purchase this scanner
instead of the original new scanner in situation 2? Justify your answer with mathematical analysis.

Unit load = 16.5 for Technologist and CT, capacity per hour = 3.636.

Hourly revenue per scanner = 500(3.636) = 1818.18

Hourly cost per scanner = 35 + 50 + (40)3.636 = 230.45
Hourly margin per scanner = 1818.18 – 230.45 = 1587.73 < 1845.50 from the current new scanner

Should not purchase this scanner.

(10 pts) Question 10

MEP production ships lots of size 1000 daily. For quality purposes, they use a (10, 1) n-c sampling
plan to determine whether to ship the entire lot without 100% inspection or to undergo 100% rectifying
inspection. The average defect rate = .05, the cost per external defect = $40 and the cost of inspection
= $5/item. Assume production costs are insignificant and replacement parts are never defective. Given
this information,

a) (6 pts) What is the expected total cost associated with this n-c plan?

expTC = sampling cost + possible inspection cost + possible cost of defect.

Pa: lamda = .5. 0 or 1 defect Pa = .91
expTC = 10*5 + (1 – Pa) N * 5 + Pa*N*p*40
expTC = 50 + .09* 5000 + .91 * 950*.05*40 = 50 + 450 +1820 = $2220

E(TC) = 1000*5 + (1000 – 10)[(0.05*40) – 5](0.9098) = 2297.894

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 b) (4 pts) What is the AOQ of this plan?

AOQ = pPa = .05*.91 = .0455

AOQ = 0.9098*0.05*[(1000 – 10)/1000]

= 0.0450351

(8 pts) Question 11
Consider the following process flow chart:

STEP ADDED VALUE YIELD

A $10 .95
B $40 .95
C $40 .95

The company sells each item for $200 but must refund the money plus $50 to any customer that receives
a faulty part. They only have access to one inspector who charges $3/part. Demand is infinite. The
inspection is perfect and there are no repairs (faulty items are discarded).

Is it better to place the inspector after step A or after step C? It is not feasible to place him after step
B. Mathematical solutions only.

To make life easy, assume we start with 1000 parts.

After A: Sell 95% of parts produced. 90.25% of parts are good. [.857375 of original]
Pay: 1000*(10+3) + 950 * 80 = 89000.
Revenue: 950 * 200 = 190,000
Defect cost: (950 – 857) * 250 = 23,250
Profit = 190k – 89k – 23.25k = 77.75

After C: Sell 857 parts

Pay: 1000 * (10 + 40 + 40 + 3) = 93,000
Revenue: 857 * 200 = 171,400
Defect cost = 0.
Profit = 171.4k – 93k = 78.4k.

Better off with inspection after C.

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(18 pts) Question 12
A system consists of independent component A and component B arranged in series. The system
reliability requirement is 0.95 for an operating time period of 100 hours. Both component A and
component B follow exponential time-to-failure distribution, with failure rate 0.0004 and 0.0003 per
hour, respectively.

a) (4 pts) What is the current system reliability?

System relaiability = e^[-(0.0004 + 0.0003)100] = 0.93239

b) (6 pts) If component A can be improved, what is the minimum average time-to-failure such as
the system reliability requirement can be met?

e^[-(x + 0.0003)100] >= 0.95

x = 0.0002129329

Minimun average time-to-failure = 1/0.0002129329 = 4696.3 hours

c) (6 pts) If multiple units of component A can be installed in parallel, what is the minimum
number of units required to meet the system reliability requirement without changing any
failure rate for components A and B.

{1 – [1 – exp(-0.04)]n}exp(-0.03) >= 0.95

n=2

d) (2 pts) If the approach in part (b) costs $1000, whereas each unit of the new component A in
part (c) costs $400. Which approach, (b) or (c), would you recommend to satisfy the system
reliability requirement?

c as it costs $400 to add an additional component A.