Ace Computer Manufacturer Buys Disk Drives in Lots of 5,000

question 99

True/False

Ace Computer Manufacturer buys disk drives in lots of 5,000 units from a supplier in California. The contract calls for, at most, 3 percent of the disk drives to be defective. When a shipment arrives, a sample of n = 15 parts is selected. If zero defects are found in this sample, the shipment is accepted. If 3 or more defects are found, the shipment is rejected and sent back to the supplier. If the number of defects found is 1 or 2, a second sample of 15 parts is selected. If this sample yields 1 or fewer defects, the shipment is accepted; otherwise the shipment is rejected. Based on a binomial distribution, the probability that Ace will reject a shipment of parts that meets the contract requirements is approximately 0.0355.

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Definitions:

Commission

A fee paid to an agent or employee for transacting a piece of business or performing a service, typically a percentage of the money received from the transaction.

Par Value

The face value of a bond or stock as stated by the issuer, which may differ from its market value.

Dividend Paid

Dividend Paid signifies the actual distribution of a company's earnings to its shareholders in the form of cash, checks, or electronic transfers.

Commission Charges

Fees paid to brokers or agents for their services in facilitating transactions, typically a percentage of the transaction value.