Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 31

Taguchi Loss Function Analysis (Appendix) Flextronchip, an OEM manufacturer, has a fifth-generation chip for cell phones, with chip specification of 0.2 ± 0.0002 mm for the distance between two adjacent pins. The loss due to a defective chip has been estimated as $20.

Required

1. Compute the value of k in the Taguchi loss function.

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2. Assume that the quality control manager takes a sample of 100 chips from the production process. The results are as follows:

Measurement	Frequency
0.1996	2
0.1997	5
0.1998	12
0.1999	11
0.2000	45
0.2001	10
0.2002	8
0.2003	5
0.2004	2

a. Calculate the estimated quality loss for each of the observed measurements.

b. Calculate the expected (i.e., average) loss for the production process as a whole.

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3. Using the data from (2) above:

a. Determine the variance in the measured distance between two pins.

b. Calculate the expected loss of the process using the calculated variance, per the method presented by Albrecht and Roth, “The Measurement of Quality Costs: An Alternative Paradigm,” Accounting Horizons (June 1992), pp. 15?27.