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In Pullman, one of the largest engineering firms is Schweitzer Engineering Labs (SEL). One of the products they produce is 1000 mu m diameter fiber optic cables. The tolerance for the diameter is plusminus 0.0015 mu m.
Assume the process is normally distributed with a mean of 1000 mu m and variance, sigma2= 0.00000075.
Any cable with a diameter smaller than the lower spec limit is scrapped at a cost of $1. Any cable with a diameter above the upper spec limit is fixed for a cost of $0.75 per cable.
Assuming that 100 cables are produced per day and that there are 250 working days per year, what is the annual cost of fixing plus scrapping?
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