Question

In: Accounting

Stahman, Inc., estimates its hidden external failure costs using the Taguchi loss function. Stahlman produces plastic...

Stahman, Inc., estimates its hidden external failure costs using the Taguchi loss function. Stahlman produces plastic sheets that vary in thickness and grade. For one of its large-volume products, it was determined that k = $26,000 and T = 0.28 inches in diameter. A sample of four units produced the following values:

Unit No. Actual Diameter (y)

1  0.28

2 0.30

3  0.26

4  0.27

1. Calculate the average loss per unit. Round your intermediate calculations to six decimal places. If required, round your answer to the nearest cent and use the same in subsequent requirements.

2. Assuming that 140,000 units were produced, what is the total hidden cost?

3. Assume that the multiplier for Stahman’s hidden external failure costs is five. What are the measured external costs?

Solutions

Expert Solution

Given
K = $26000
Part 1
Unit Actual Diameter (y) m y-m (y-m)2 Loss = k*(y-m)2
1 0.28 0.28 0 0 0
2 0.30 0.28 0.02 0.0004 10
3 0.26 0.28 -0.02 0.0004 10
4 0.27 0.28 -0.01 0.0001 3
Total Loss 23
Avg Loss 6
Part 2
Total Units produced = 140000 units
So, Total Hidden cost = 140000* $6
                                           = $840000
Part 3
Unit Actual Diameter (y) m y-m (y-m)2 Multiplier Loss = k*Multiplier*(y-m)2
1 0.28 0.28 0 0 5 0
2 0.30 0.28 0.02 0.0004 5 52
3 0.26 0.28 -0.02 0.0004 5 52
4 0.27 0.28 -0.01 0.0001 5 13
Measured External cost 117

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