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5. (15) A financial audit system conducts audits of project accounts at a major defense contractor. The number of discrepancies found is the quality characteristic, and it is approximately normally distributed with mean 101.7. Random samples are selected for monitoring using control charts, where control limits are UCL = 110.9 and LCL = 92.5 using k = 3 and n = 5. If the number of discrepancies in an account is above 115, management calls for an investigation at an average cost of $3,100. If the number of discrepancies is below 85, a re-audit is initiated since mistakes are assumed in the original audit. A re-audit costs $1,200 on average. a. What is the process capability for the audit process? b. How much would process capability change if the process were centered at 100 discrepancies per audit on average with the same standard deviation? c. A more rigorous account management process is proposed for development. It will yield PCR = 1. How much at most would management be willing to pay for it, given a 5,000 audit payback period. Compare with the original process, not the hypothetical centered one. 5. (15) A financial audit system conducts audits of project accounts at a major defense contractor. The number of discrepancies found is the quality characteristic, and it is approximately normally distributed with mean 101.7. Random samples are selected for monitoring using control charts, where control limits are UCL = 110.9 and LCL = 92.5 using k = 3 and n = 5. If the number of discrepancies in an account is above 115, management calls for an investigation at an average cost of $3,100. If the number of discrepancies is below 85, a re-audit is initiated since mistakes are assumed in the original audit. A re-audit costs $1,200 on average. a. What is the process capability for the audit process? b. How much would process capability change if the process were centered at 100 discrepancies per audit on average with the same standard deviation? c. A more rigorous account management process is proposed for development. It will yield PCR = 1. How much at most would management be willing to pay for it, given a 5,000 audit payback period. Compare with the original process, not the hypothetical centered one

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