Stacy Little is the management accountant at Track Manufacturing, an auto supplier that produces brake pads. (Click the icon to view the additional information and the validation set.) Working brake pads yield a profit of $21. If defective brake pads are identified before they are shipped, they can be fixed and sold as working brake pads. However, the process of inspecting and repairing brake pads that are predicted to be defective incurs costs. If a brake pad is predicted to be defective, it costs $4 to re-inspect it and, if found to be actually defective, it costs an additional $14 to repair. Track incurs a net loss of $49 for defective brake pads shipped to customers because of additional costs (including reputation costs). Read the requirements. Requirement 2. Stacy is deciding whether to use a cutoff of 0.50 or 0.30 . Fill in the confusion matrices based on the validation set. (Complete all input fields. Enter a 0 for any zero balances.) Requirement 3. What cutoff value should Stacy use? Explain. If the default probability cutoff is set at 0.50 , the payoff = If the default probability cutoff is set at 0.30 , the payoff = Stacy should set the cutoff value at because it results in the predicted payoff based on the validation set. Requirement 4. Stacy is uncertain about the $49 net loss if a defective brake pad is shipped to customers. At what loss would Stacy prefer to use the other cutoff value (i.e., the cutoff value Stacy did not choose in requirement 3 )? (Enter the amount as a whole dollar, \$X.) If the net loss of a defective brake pad was less than this amount, Stacy would prefer to use the other cutoff value: Requirements 1. Fill in the payoff matrix. 2. Stacy is deciding whether to use a cutoff of 0:50 or 0.30 . Fill in the confusion matrices based on the validation set. 3. What cutoff value should Stacy use? Explain. 4. Stacy is uncertain about the $49 net loss if a defective brake pad is shipped to customers. At what loss would Stacy prefer to use the other cutoff value (i.e., the cutoff value Stacy did not choose in requirement 3 )? Data table Track's customers have high safety standards, and managers at Track believe they can gain a competitive advantage by reducing the number of defective parts they produce. Stacy works with an external data science consulting company to develop a prediction model that identifies defective brake pads (y=1) before they are shipped to Track's clients. After building the model on a training dataset, Stacy tests its accuracy on the validation set below. Stacy Little is the management accountant at Track Manufacturing, an auto supplier that produces brake pads. (Click the icon to view the additional information and the validation set.) Working brake pads yield a profit of $21. If defective brake pads are identified before they are shipped, they can be fixed and sold as working brake pads. However, the process of inspecting and repairing brake pads that are predicted to be defective incurs costs. If a brake pad is predicted to be defective, it costs $4 to re-inspect it and, if found to be actually defective, it costs an additional $14 to repair. Track incurs a net loss of $49 for defective brake pads shipped to customers because of additional costs (including reputation costs). Read the requirements. Requirement 2. Stacy is deciding whether to use a cutoff of 0.50 or 0.30 . Fill in the confusion matrices based on the validation set. (Complete all input fields. Enter a 0 for any zero balances.) Requirement 3. What cutoff value should Stacy use? Explain. If the default probability cutoff is set at 0.50 , the payoff = If the default probability cutoff is set at 0.30 , the payoff = Stacy should set the cutoff value at because it results in the predicted payoff based on the validation set. Requirement 4. Stacy is uncertain about the $49 net loss if a defective brake pad is shipped to customers. At what loss would Stacy prefer to use the other cutoff value (i.e., the cutoff value Stacy did not choose in requirement 3 )? (Enter the amount as a whole dollar, \$X.) If the net loss of a defective brake pad was less than this amount, Stacy would prefer to use the other cutoff value: Requirements 1. Fill in the payoff matrix. 2. Stacy is deciding whether to use a cutoff of 0:50 or 0.30 . Fill in the confusion matrices based on the validation set. 3. What cutoff value should Stacy use? Explain. 4. Stacy is uncertain about the $49 net loss if a defective brake pad is shipped to customers. At what loss would Stacy prefer to use the other cutoff value (i.e., the cutoff value Stacy did not choose in requirement 3 )? Data table Track's customers have high safety standards, and managers at Track believe they can gain a competitive advantage by reducing the number of defective parts they produce. Stacy works with an external data science consulting company to develop a prediction model that identifies defective brake pads (y=1) before they are shipped to Track's clients. After building the model on a training dataset, Stacy tests its accuracy on the validation set below
