To draw: The profit when there are defects and when there are no defects. Introduction Six Sigma refres to the technique used to remove th enumebr of defects fron a process. It is used in order to improve the quality of processes. Six Sigma decreases the variations in the process and this leads to improved performance.

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Chapter 2, Problem 14P

Summary Introduction

To draw: The profit when there are defects and when there are no defects.

Introduction

Six Sigma refres to the technique used to remove th enumebr of defects fron a process. It is used in order to improve the quality of processes. Six Sigma decreases the variations in the process and this leads to improved performance.

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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…

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…

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