Nike, Inc. uses the following procedure for inspection. After each production cyle, an inspector selects sample of 10 shoes from every large batch before the batch is packaged and shipped. According to the contract specifications, 5 percent of the shoes shipped can be defective. If the inspectors find 1 or fewer defects in the sample of 10, they ship the batch without further inspection. If they find 2 or more, the entire batch is inspected. Based on this sampling plan, the probability that a batch that meets the contract requirements will end up being 100 percent inspected is approximately .0746.

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