IASSC Certified Lean Six Sigma Black Belt (ICBB) — Question 4

A Belt working in a supply chain environment has to make a decision to change suppliers of critical raw materials for a new product upgrade. The purchasing manager is depending on the Belts effort requiring that the average cost of an internal critical raw material component be less than or equal to $3,800 in order to stay within budget. Using a sample of 38 first article components, a Mean of the new product upgrade price of $3,680, and a Standard Deviation of $120 was estimated. In order to increase the Long Term Z value to 5, what is the maximum long term variation in pricing the Belt can accept for his upgraded critical raw material component?

Answer options

Correct answer: C

Explanation

The correct answer is C, $24, because to achieve a Long Term Z value of 5, the Belt can only allow a certain variation in pricing, calculated using the formula related to standard deviations and Z-scores. Options A, B, and D do not meet the necessary criteria for maintaining the budget and achieving the required Z value.