A company makes 1,000,000 parts. If fewer than ___ were defective, it would be six sigma quality.
Explanation
Answer: d - Each sigma represents a standard deviation. Sigma is taken to both the left and right of a normal distribution curve. Six sigma implies that 99.99985% fall within standards, or less than 2 defects per million.
For the basis of comparison:
1 sigma is 68.26%. This would be 317,400 defects per million.
2 sigma is 95.46%. This would be 45,400 defects per million.
3 sigma is 99.73%. This would be 2,700 defects per million.
6 sigma is 99.99985%, or less than 2 defects per million.
Key Takeaway: Six sigma is a common buzzword, but a good leader would analyze whether achieving this level of quality makes sense.
Marginal analysis assesses where the optimal level of quality is for a firm. In some cases, higher quality means so much more precision and testing that it isn’t worth the additional expense. A marginal analysis finds the point at which a company no longer receives incremental revenue for its incremental investment. This is a valuable concept to know in quality and cost management. Those who majored in economics will feel more comfortable with this concept initially.
