A manufacturer of computer chips has a computer hardware company as its largest

Question

A manufacturer of computer chips has a computer hardware company as its largest customer. The computer hardware company requires all of its chips to meet specifications of 1.2 cm. The vice-president of manufacturing, concerned about a possible loss of sales, assigns his production manager the task of ensuring that chips are produced to meet the specification of 1.2 cm. Based on the production run from last month, a 95% confidence interval was computed for the mean length of a computer chip resulting in: 95% confidence interval: (0.9 cm, 1.1 cm) What are the elements that the production manager should consider in determining his company’s ability to produce chips that meet specifications? Do the chips produced meet the desired specifications? What reasons should the production manager provide to the vice-president to justify that the production team is meeting specifications? How will this decision impact the chip manufacturer’s sales and net profit?

Explanation / Answer

A 95% confidence interval for a variable's value is equivalent to saying: " We are 95% confident that the mean(expected) value for this variable lies between a and b".

Here we have a = 0.9 cm and b = 1.1 cm, and the expected value is 1.2 cm

Since the expected value for the variable clearly lies outside the confidence interval, this means that there is less than 5% chance that the company would be able to produce the chips with mean size 1.2 cm.

Thus the company manager must advice the vice president that the current statistics doesn't fulfil the required standards.

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