Competency 2 Statement

Utilizing statistical probability models, evaluate and analyze business data under uncertainty conditions. Reflect on hypotheses and draw conclusions based on samples of data given below.

A laptop manufacturing company has implemented a 2-step process to test the quality of each production batch. In the first step, a technician randomly selects 15 laptops from the batch and determines whether they meet specifications. The batch is considered acceptable provided no more than 1 laptop fails to meet specifications. Otherwise, the entire batch has to be tested in the second step. Historical data shows that 95% of the laptops produced adhere to specifications.

Reflect on the following:

• What are the 4 characteristics of a binomial experiment?
• Can we use a binomial distribution to model this process?
• What is the probability that the entire batch unnecessarily has to be tested if in fact 95% of its laptops conform to specifications? (Hint: Use Excels =BINOMDIST() function to find the probability)
• What is the probability that the batch is incorrectly accepted if only 75% of its laptops actually conform to specifications?
• What situations in your organization might this type of analysis apply to? Explain.