Instruction 10-6
a Buyer for a Manufacturing Plant Suspects That

question 137

Short Answer

Instruction 10-6
A buyer for a manufacturing plant suspects that his primary supplier of raw materials is overcharging.In order to determine if his suspicion is correct,he contacts a second supplier and asks for the prices on similar various materials.He wants to compare these prices with those of his primary supplier.The data collected is presented in the table below,with some summary statistics presented (all of these might not be necessary to answer the questions which follow).The buyer believes that the differences are normally distributed and will use this sample to perform an appropriate test at a level of significance of 0.01.
$$\begin{array} { c c c r } \text { Material } & \begin{array} { c } \text { Primary } \\\text { Supplier }\end{array} & \begin{array} { c } \text { Secondary } \\\text { Supplier }\end{array} & \text { Difference } \\\hline 1& \$ 55 & \$ 45 & \$ 10 \\2 & \$ 48 & \$ 47 & \$ 1 \\3 & \$ 31 & \$ 32 & - \$ 1 \\4 & \$ 83 & \$ 77 & \$ 6 \\5 & \$ 37 & \$ 37 & \$ 0 \\6& \$ 55 & \$ 54 & \$ 1 \\\hline \hline \text { Sum: } &\$309&\$292&\$17\\\text { Sum of Squares. } & \$ 17,573 & \$ 15,472 & \$ 139\end{array}$$
-Referring to Instruction 10-6,what is the 99% confidence interval estimate for the mean difference in prices?

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Definitions:

Supply-Chain Management

The coordination and management of a network of interconnected businesses involved in the provision of product and service packages required by the end customers.

Purchased

The act of acquiring goods or services in exchange for money or its equivalent.

Operations Management

The administration of business practices to create the highest level of efficiency possible within an organization, focusing on converting materials and labor into goods and services as efficiently as possible.

Tangible

Physical or material assets that can be seen, touched, or measured, in contrast to intangible assets like intellectual property or brands.