A Sampling Plan Is Best for Evaluating Quality When: (1)

question 10

Multiple Choice

A sampling plan is best for evaluating quality when: (1) Inspection costs are high
(2) Inspection costs are low
(3) Non-destructive testing is available
(4) Destructive testing is required

• A) 1 and 3
• B) 1 and 4
• C) 2 and 3
• D) 2 and 4

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Definitions:

State of Nature

A term used in decision theory referring to the actual but possibly unknown status of the world, which affects the outcomes of decisions.

Opportunity Loss

The cost of the next best alternative foregone as a result of making a decision.

Actual Profit

The realised gain from business operations or investments, after all costs and expenses have been deducted.

Payoff Table

A tabular representation of the possible outcomes or payoffs in a decision-making problem, against various decisions under different states of nature.