Figure 14-1 A company produces screw fittings.It is determined that T = 1 inch in diameter.Specification limits allow a variation of plus or minus 0.5 inches.Products produced at values beyond the specification limits lose $10.A sample of five units produced showed the following values:

- Refer to Figure 14-1.What is the cost of hidden loss for production of 50,000 units?

Question

Figure 14-1 A company produces screw fittings.It is determined that T = 1 inch in diameter.Specification limits allow a variation of plus or minus 0.5 inches.Products produced at values beyond the specification limits lose $10.A sample of five units produced showed the following values:

- Refer to Figure 14-1.What is the cost of hidden loss for production of 50,000 units?

Quizplus · Accepted Answer

The sample of five units produced has values ranging from 0.94 to 1.05 inches, which means that two units are outside the specification limits and incur a hidden loss of $10 each. Therefore, the hidden loss for each sample is $20.

To produce 50,000 units, we need to know how many samples of five units we need. This is calculated as:

50,000 / 5 = 10,000

Therefore, we will have 10,000 samples of five units.

If each sample has a hidden loss of $20, then the total hidden loss for 10,000 samples is:

$20 × 10,000 = $200,000

Therefore, the cost of hidden loss for production of 50,000 units is $200,000, which is closest to option C - $72,000. The other options are significantly higher than the calculated amount.

Figure 14-1 a Company Produces Screw Fittings