The Blue Parrot is an expensive restaurant in midtownopen only for dinner. Entrees are set at a fixed price of $42.In a typical month the restaurant will serve 3,600 entrees.Monthly variable costs are $61,200, and fixed costs are$31,000 per month. Customers or waiters send back 8% ofthe entrees because of a defect, and they must be preparedagain; they cannot be reworked. The restaurant owners hired a qualified black belt to undertake a Six Sigma pro-ject at the restaurant to eliminate all defects in the prepara-tion 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 percent-age increase in profits following the Six Sigma project. As-suming that the restaurant paid the black belt $25,000 to achieve zero defects, and the restaurant owners plan toamortize this payment over a three-year period (as a fixed cost), what is the restaurant return on its investment (with-out applying an interest rate)? Discuss some other aspects of quality improvement at the restaurant that might resultfrom the Six Sigma project.
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 3,600 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 pro-
ject at the restaurant to eliminate all defects in the prepara-
tion 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 percent-
age increase in profits following the Six Sigma project. As-
suming 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 restaurant return on its investment (with-
out 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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