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Effect of Statistical Process Control
The essence of this approach is that, having set up a process and established that it is stable, sample measurements of the process output are taken at intervals. These measurements are analysed by statistical methods to determine any tendency for the output to drift. If such deviation of the output occurs and breaches predetermined limits, the process may be stopped and readjusted, thereby preventing the production of non-conforming output. As will be stressed again later, it is important to understand that the predetermined limits are control limits which are based on the variability of the process output when the process is considered to be stable: they are not the limits of the design tolerance band.
The first process is expected to incur $280,000 of fixed cost and add $60 of variable cost for each unit produced. The second process has fixed costs of $200, 00 and adds $70 per e
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