Question

The Thames Company has decided to estimate the cost of hidden external failures using the Taguci loss function. From several studies, it was determined that k = $ 200 and T = 15 inches in diameter. A sample of four product units produces the following:

Unit	Actual Diameter (y)
1	14,9
2	15,1
3	15,2
4	14,8

Questions:
1. Calculate the average loss per unit?
2. Assuming that 5,000 units are produced, how much is the total hidden cost?

Answer 1

Solution :-

1 ) :-

By using this Taguchi Loss Function we need to calculate the Average cost per unit .

This is the formula

Where ,

k = $200

m = T = 15 inches

units	Y	m
1	14.9	15	= = = =
2	15.1	15	= = = =
3	15.2	15	= = = =
4	14.8	15	= = = =
Total			= =
Average cost per unit			= = =

2):-

Here we need to find out the Hidden cost for 5,000 units .

Hidden cost = 5,000 units * $5

= $25,000

Hidden cost = $25,000 .