Supplemental Exercises

1. NewLife Finance handles two types of claims: hospital and physician. NewLife
charges the HMOs $10 per hospital claim (HC) and $9 per physician claim (PC). The
variable costs per claim are negligible. The theoretical capacity of the process is 375
claims per day in the case of HC and 545 claims per day for PC.
a. Which of the two types of claims is more profitable for NewLife?
b. Assume the maximum number of PCs available for processing per day is 400.
What is the best product mix for NewLife? (Assume claims are processed by 10
employees, each working 8 hours (480 minutes) per day.)
2. Tile&Style Company produces kitchen and bathroom tiles in two sizes: jumbo and
regular. A bundle of tiles contains 4 jumbo tiles or 9 regular tiles and is cut out of a
single, larger plate. The cutting time per bundle is 1 minute for jumbo and 2 minutes
for regular. Currently, 75% of the bundles are regular, and 25% are jumbo.
Typically, Tile&Style produces 300 bundles of regular tiles before it switches over
and produces 100 bundles of jumbo. The switching time from one size to the other is
30 minutes in both directions. Plates are cut into tiles by a cutting machine that is
available 8 hours per day. Compute the effective capacity of the process (bundles per
hour).
3. Redo Exercise 7.2b assuming a replenishment leadtime standard deviation of 1 week
(all other information in the problem is the same).
4. After a number of complaints about its call center performance, a communications
company examined samples of calls to determine the frequency of incorrect
information given to callers. Each sample consisted of 100 calls. Determine 95%
control limits for monitoring the process. Is the process stable (i.e., in-control)?
Sample
No. calls
with
errors

10 11 12 13 14 15 16

5. An appliance manufacturer wants to contract with a repair shop to handle authorized

repairs in Indianapolis. The company has set an acceptable range of repair time of 50
minutes to 90 minutes. Two firms have submitted bids for the work. In test trials,
one firm had a mean repair time of 74 minutes with a standard deviation of 4.0
minutes and the other firm had a mean repair time of 72 minutes with a standard
deviation of 5.1 minutes. Which firm would you choose and why?

6. Computer upgrades have a targeted time of 80 minutes. Six samples of 5

observations each have been taken, and the results are listed below. Determine the
appropriate 98% control chart(s) for monitoring the process. Is the process stable
(i.e., in-control)?
Sample
1
2
3
4
5
6
79.2
80.5
79.6
78.9
80.5
79.7
78.8
78.7
79.6
79.4
79.6
80.6
80.0
81.0
80.4
79.7
80.4
80.5
78.4
80.4
80.3
79.4
80.8
80.0
81.0
80.1
80.8
80.6
78.8
81.1
7. The postmaster of a small western town receives a certain number of complaints each
day about mail delivery. Using the following data, determine 3-sigma control limits
for monitoring the process. Is the process stable (i.e., in control)?
Sample
No. of
complaints

10

11

12

13

14

10

14

12

13

10