Operations management

qso_600_problem_2_olympic_shoe.docx

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Problem 2. The Olympic Shoe Company manufactures a number of different styles of athletic shoes. Its biggest seller is the X-Pacer running shoe. In 2008 Olympic implemented a quality-management program. The company's shoe production for the past three years and manufacturing costs are as follows.

	Year
	2008	2009	2010
Units produced/input	32,000	34,600	35,500
Manufacturing cost	$278,000	291,000	305,000
Percent good quality	78%	83%	90%

Only one-quarter of the defective shoes can be reworked, at a cost of $2 apiece. Compute the manufacturing cost per good product for each of the three years and indicate the annual percentage increase or decrease resulting from the quality-management program