The specifications on an electronic component in a target

Reference no: EM13612963

The specifications on an electronic component in a target acquisition system are that its life must be between 5,000 - 10,000 h. The life is normally distributed with mean 7500 h. The manufacturer realizes a price of $10 per unit produced; however defective units must be replaced at a cost of $5 to the manufacturer.

Two different manufacturing processes can be used, both of which have the same mean life. However the standard deviation of life for process 1 is 1000 h, where as process 2 is only 500 h. Production costs for process 2 are twice those for process 1. What value of production cost will determine the selection between processes 1 and 2?

Reference no: EM13612963

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