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In: Statistics and Probability

The specifications on an electronic component in a target-acquisition system are that its life must be...

The specifications on an electronic component in a target-acquisition system are that its life must be greater than 5000 hrs. Assume the life is normally distributed with mean 7500 hrs. The manufacturer realizes a sale price of $10 per unit produced (i.e. profit is $10 minus manufacturing cost); however, defective units must be replaced at a cost of $5 to the manufacturer, thus the defective cost will be $5 plus manufacturing cost. Two different manufacturing processes can be used, both of which have the same mean life. However, the standard deviation of life for process 1 is 1000 hrs, whereas for process 2 it is only 500 hrs. Production costs for process 2 are twice those for process 1. What value of manufacturing costs will determine the selection between processes 1 and 2?

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orchestra answered 2 years ago
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