An Acceptance Sampling Plan with N = 20 and C

question 69

Essay

An acceptance sampling plan with n = 20 and c = 1 has been designed with a producer's risk of .12.
a. Was the value of p₀ equal to .02, .03, .04, or .05?
b. What is the consumer's risk associated with this plan if p₁ is .08?
c. Assume the consumer's risk found in (b) is unacceptably high. Which modification of the sampling plan will result in the greater reduction of the consumer's risk, increasing n to 30 or decreasing c to 0?

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Definitions:

Residual Value

The estimated value that an asset will realize upon its sale at the end of its useful life.

Capital Lease

A lease agreement that qualifies as a purchase of an asset for accounting purposes, because it substantially transfers all the benefits and risks of ownership to the lessee.

Incremental Borrowing Rate

The interest rate a lessee would have to pay to borrow, over a similar term and with a similar security, the funds needed to obtain an asset lease.

Leased Equipment

Assets obtained by a company through a leasing agreement, allowing the company to use the equipment without owning it.