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2.14. The Blue Parrot is an expensive restaurant in midtown open only for dinner. Entrees are set at a fixed price of $42. In a typical month the restaurant will serve 3600 entrees. Monthly variable costs are $61,200, and fixed costs are $31,000 per month. Customers or waiters send back 8% of the entrees because of a defect, and they must be prepared again; they cannot be reworked. The restaurant owners hired a qualified Black Belt to undertake a Six Sigma project at the restaurant to eliminate all defects in the preparation of the entrees (i.e., 3.4 DPMO). Compare the profit in both situations, with and without defects, and indicate both the percentage decrease in variable costs and the percentage increase in profits following the Six Sigma project. Assuming that the restaurant paid the Black Belt $25,000 to achieve zero defects and the restaurant owners plan to amortize this payment over a three-year period (as a fixed cost), what is the restau- rant's return on its investment (without applying an interest rate)? Discuss some other aspects of quality improvement at the restaurant that might result from the Six Sigma project.

2.14. The Blue Parrot is an expensive restaurant in midtown open only for dinner. Entrees are set at a fixed price of $42. In a typical month the restaurant will serve 3600 entrees. Monthly variable costs are $61,200, and fixed costs are $31,000 per month. Customers or waiters send back 8% of the entrees because of a defect, and they must be prepared again; they cannot be reworked. The restaurant owners hired a qualified Black Belt to undertake a Six Sigma project at the restaurant to eliminate all defects in the preparation of the entrees (i.e., 3.4 DPMO). Compare the profit in both situations, with and without defects, and indicate both the percentage decrease in variable costs and the percentage increase in profits following the Six Sigma project. Assuming that the restaurant paid the Black Belt $25,000 to achieve zero defects and the restaurant owners plan to amortize this payment over a three-year period (as a fixed cost), what is the restau- rant's return on its investment (without applying an interest rate)? Discuss some other aspects of quality improvement at the restaurant that might result from the Six Sigma project.

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
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2.14. The Blue Parrot is an expensive restaurant in midtown open only for dinner. Entrees are set at a fixed price of $42. In a typical month the restaurant will serve 3600 entrees. Monthly variable costs are $61,200, and fixed costs are $31,000 per month. Customers or waiters send back 8% of the entrees because of a defect, and they must be prepared again; they cannot be reworked. The restaurant owners hired a qualified Black Belt to undertake a Six Sigma project at the restaurant to eliminate all defects in the preparation of the entrees (i.e., 3.4 DPMO). Compare the profit in both situations, with and without defects, and indicate both the percentage decrease in variable costs and the percentage increase in profits following the Six Sigma project. Assuming that the restaurant paid the Black Belt $25,000 to achieve zero defects and the restaurant owners plan to amortize this payment over a three-year period (as a fixed cost), what is the restau- rant's return on its investment (without applying an interest rate)? Discuss some other aspects of quality improvement at the restaurant that might result from the Six Sigma project.
Transcribed Image Text:2.14. The Blue Parrot is an expensive restaurant in midtown open only for dinner. Entrees are set at a fixed price of $42. In a typical month the restaurant will serve 3600 entrees. Monthly variable costs are $61,200, and fixed costs are $31,000 per month. Customers or waiters send back 8% of the entrees because of a defect, and they must be prepared again; they cannot be reworked. The restaurant owners hired a qualified Black Belt to undertake a Six Sigma project at the restaurant to eliminate all defects in the preparation of the entrees (i.e., 3.4 DPMO). Compare the profit in both situations, with and without defects, and indicate both the percentage decrease in variable costs and the percentage increase in profits following the Six Sigma project. Assuming that the restaurant paid the Black Belt $25,000 to achieve zero defects and the restaurant owners plan to amortize this payment over a three-year period (as a fixed cost), what is the restau- rant's return on its investment (without applying an interest rate)? Discuss some other aspects of quality improvement at the restaurant that might result from the Six Sigma project.
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