Question

The accounts receivable department has documented the following problems over a 30-day period:

Category	Frequency
Invoice not on record (not found)	24
No formal invoice issued	18
Check (payment) not received on time	30
Check not signed	8
Invoice number and invoice referenced do not agree	12
Invoice amount does not agree with the check amount	108

Note: Decimals should be rounded to four (4) decimal places; percentages should be rounded to one (1) decimal place.

1. Provide the Pareto chart based on relative frequency (or proportion).

Create the chart in Excel,

b.   What is the most typical defect?

c.   As a percentage, how typical is this defect?

d.   Based on your Pareto chart, prioritize the quality improvements in decreasing order of importance.

Answer 1

(a)

Category	Frequency	Relative fr.	Cumulative fr.
Invoice amount does not agree with the check amount	108	0.54	0.54
Check (payment) not received on time	30	0.15	0.69
Invoice not on record (not found)	24	0.12	0.81
No formal invoice issued	18	0.09	0.90
Invoice number and invoice referenced do not agree	12	0.06	0.96
Check not signed	8	0.04	1
Total	200	1

(b)

The most typical defect is "Invoice amount does not agree with the check amount"

(c)

In relative frequency terms, it is 0.54 or 54% in percentage terms.

(d)

The decreasing order of importance:

1. Invoice amount does not agree with the check amount
2. Check (payment) not received on time
3. Invoice not on record (not found)
4. No formal invoice issued
5. Invoice number and invoice referenced do not agree
6. Check not signed