A manufacturing receives the following order for calculators: July 5,000 units
August: 6,000 units
Setember 5,000 units

The manufacturing provided the following information for manufacturing the calculator:
Production lead time: 7 days
Quality: 5 errors per million calculators

Required:
What are the production requirements in units for the month of July?

The production requirement for the month of July in units is 5001 units.

Explanation:

In the given case, manufacturer receives the order for calculators for month July is 5000 units

In this case it is given as the quality of the units produced are 5 defect products for 1 million units.  

Defect ratio = (Defect products produced/total production produced) × 100

Defect ratio = (5 / 1000000) * 100

Defect ratio = 0.0005%

In the given case the production requirements are asked for only July month.

As per orders received, the manufacturer has to produce 5000 units.  It means, manufacturer has to produce the required number of units plus possible defect units.  It means, to produce required good quality products, the manufacture may produce some defective products based on defect ratio

Production requirements = Required good quality products + (required good quality products × defect ratio)

= 5000 units + (5000 × 0.0005%)

= 5000 units + 0.0025 units

= 5000.0025 units

= 5001 units

As manufacturer cannot produce the 0.0025 units the manufacturer has to produce 1 unit to compensate defective products for production of 5000 good quality products.  Therefore, the production requirement for the month of July in units is 5001 units.

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