Management is considering adopting a bonus system to increase production. One su

Question

Management is considering adopting a bonus system to increase production. One suggestion is to pay a bonus on the highest 7 percent of production based on past experience. Past records indicate that, on the average, 4,152 units of a small assembly are produced during a week. The distribution of the weekly production is approximately normally distributed with a standard deviation of 57 units. If the bonus is paid on the upper 7 percent of production, the bonus will be paid on how many units or more?

Explanation / Answer

First, we get the z score from the given left tailed area. As          
          
Left tailed area = 1 - 0.07 =   0.93      
          
Then, using table or technology,          
          
z =    1.475791028      
          
As x = u + z * s,          
          
where          
          
u = mean =    4152      
z = the critical z score =    1.475791028      
s = standard deviation =    57      
          
Then          
          
x = critical value =    4236.120089   [ANSWER]  

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