Question

Purchasing decision. Suppose you are a purchasing officer for a large company. You have purchased 5 million electrical switches, and your supplier has guaranteed that the shipment will contain no more than .1% defectives. To check the shipment, you randomly sample 500 switches, test them, and find that four are defective. Based on this evidence, do you think the supplier has complied with the guarantee? Explain

Short answer

A supplier is an individual, firm, as well as institution that distributes and supplies anything to clients, like commodities as well as technology.

Step-by-step solution

Step-by-Step Solution Step 1: Supplier

A supplieris a person as well as a company that sells or rents a good or service to some other organization. A supplier's function in a company is to deliver high-quality items from a producer at a reasonable cost to a distributor or retailer for resale. A supplier in a company is somebody who works as a go-between for the retailers and customers, ensuring that contact is open as well as inventory is of adequate quality.

The calculation is given below

$\text{Populationproportion}<0.0\text{1v}/\text{sPopulationproportion}>0.0\text{1}$

The calculation is shown below:

$$\begin{gathered} \text{SampleProportion}\left(\stackrel{⏜}{\mathrm{P}}\right)=\frac{4}{500} \\ =0.008 \end{gathered}$$

Under Ho,

$$\begin{gathered} \text{z=}\frac{\stackrel{⏜}{\mathrm{P}}-\text{Po}}{\sqrt{\frac{\text{Po}(1-\text{Po})}{\text{n}}}} \\ \text{=}\frac{0.008-0.01}{\frac{\sqrt{0.01\times 0.99}}{500}} \\ \text{z}=-0.449467 \end{gathered}$$

If z > 2.326348, we will reject Ho at the 1% significant level.

Here,

If z < 2.326348, we do not reject Ho at the 1% significant level that is distributor has compiled with a guarantee.