A Production Process Produces 10 Percent Defective Items

question 162

Short Answer

A production process produces 10 percent defective items.
Describe the sampling distribution of the proportion of defectives for a simple random sample of n = 50.
Is the distribution approximately normal?
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What is the mean?
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What is the standard deviation?
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What is the likelihood of encountering a sample proportion within 0.03 of the population proportion?
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If the production process is shut down whenever a sample proportion of defectives exceeds 0.05, what is the likelihood of this happening?
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Definitions:

Incremental Cost Approach

A decision-making process that focuses on the changes in total cost resulting from a specific business decision, considering only the relevant costs and benefits that differ between alternatives.

Operating Costs

Expenses associated with running a business's core activities on a day-to-day basis, such as salaries, rent, and utilities.

Discount Rate

The discount rate that is employed during discounted cash flow evaluation to ascertain the present valuation of future expected cash flows.

Simple Rate of Return

A financial metric that calculates the gain or loss of an investment over a specific period as a percentage of the investment's initial cost.