Suppose that you work for a newly restructured automotive company with nearly 10

Question

Suppose that you work for a newly restructured automotive company with nearly 100,000 employees. You are in charge of purchasing engines from an overseas supplier. Company policy is that you purchase 500 engines each month to be placed into cars on the assembly line. Your overseas supplier of engines guarantees that no more than 0.9% of the new engines shipped to you will fail a simple electrical test. To checkout the monthly shipment of the 500 engines you randomly select and test 50 of these engines, and you find that 1 is defective. Do you think that the supplier has met the guarantee? Choose one answer. A. The z-value is more than 3 standard deviations from the mean. So, we conclude that the overseas supplier has not met the guarantee. B. The z-value is less than 3 standard deviations from the mean. So, we cannot conclude that the overseas supplier has not met the guarantee. C. Neither of these is the correct answer.

Explanation / Answer

The Z score is calculated as z = (raw reading - mean reading)/ Standard Deviation

From the information in the question you cannot calculate a Z score.

However the guarantee is that no more than 0.9% of each lot of engines will fail the test.

0.9% *500 = 0.9*5 = 4.5 engines out of 500 or 0.45 out of 50. i.e. less than 1 in 50
Neither A nor B is correct. But I don't think the supplier has met the guarantee.

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