ECE 3500 DIGITAL ELECTRONICS
SPRING 2006
Bonus Essay Assignment #1
3% of course grade
Due 9:00am, Friday, April 21, 2006
Write an essay to answer the questions raised in the problem statement below. It must be
of minimum two pages long but not longer than three pages. If any resource is used to
write your answer it must be properly referred to. The page set up is as follows: 1”
margins, 12 pt fonts (Times New Roman), single line space.
Allowing Defective Chips To Go To Market
by Jeremy Hanzlik
Texas A & M University College Station, TX 77843
Introduction
A production line engineer, Shane, checks every chip for quality control (QC). His
workers find errors approximately every 150 chips. Either the defective chips must be
sent back for repair or they must be axed (thrown away). The manager, Rob, has
mandated that workers must axe all defective chips. Rob walks over to Shane's line and
declares, "Why some lines sink more dollars into a chip that's failed, I don't understand.
We only make 25 cents off of each chip anyway! Spending an additional $2.00 per chip
will only be more money down the drain. Shane, in our line of work we can't afford to
flush money down the toilet."
The following afternoon, Rob calls a meeting in his office. Rob informs Shane, that
Shane's line is axing too many chips. "One chip every hundred and fifty is unacceptable!
This is becoming a substantial cost to the company. I believe that it would be more
beneficial to allow defective chips to go out the door." Shane asks, "What about the
defective chips? Won't customers complain?" Rob replies, "Yeah, yeah, but that's not
your problem, the company has a return department that will replace them as customers
complain." Rob further estimates that allowing defective chips on the market will yield a
$416,000 profit for the company.
Facts:
* The line produces 100,000 chips per year.
* Every chip is purchased.
* Chips cost about $9.00 to produce.
* Chip testing costs about $4.00 per chip.
* Chip repair (manpower and material) is about $2.00 per chip.
* This repair cost includes re-testing.
* Profit per chip is $0.25 after testing.
