Jetrans Airlines operates daily round-trip flights on the London–Vancouver route using a fleet of three 747s: the Spirit of Birmingham, the Spirit of Glasgow, and the Spirit of Manchester. The budgeted quantity of fuel for each round-trip flight is the 12-month mean (average) round-trip fuel consumption of 757,082 litres, with a standard deviation of 75,708 litres. A litre-unit is 3,785.4 litres.
Therefore the round-trip fuel consumption average is 200 litre-units, with a standard deviation of 20 litreunits. This is an example of the conference method of estimating costs using complex, but industry-appropriate, units.
Using a statistical quality control (SQC) approach, Shirley Watson, the Jetrans operations manager, investigates any round-trip with fuel consumption that is greater than two standard deviations from the mean. In October, Watson receives the following report for round-trip fuel consumption for the three planes on the London–Vancouver route:
1. Using the 2σ rule, what variance-investigation decisions would be made?
2. Present SQC charts for round-trip fuel usage for each of the three 747s in October. What inferences can you draw from the charts?
3. Some managers propose that Jetrans Airlines present its SQC charts in monetary terms rather than in physical-quantity terms (litre-units). What are the advantages and disadvantages of using monetary fuel costs rather than litre units in the SQC charts?