Question

The defect rate for data entry of insurance claims at Sadegh Kazemi Insurance Co. has historically been about 1.50​%. This exercise contains only parts​ a, b,​ c, d, and e. ​a) If you wish to use a sample size of 200​, the 3​-sigma control limits are​:

Answer 1

Answer and Explanation:

Data provided in the question

defect rate i.e. $\bar p$ = 1.50%

the sample size = n = 200

Now

$S_p = \sqrt{\frac{\bar p (1 - \bar p)}{n} } \\\\= \sqrt{\frac{1.50\% (1 - 1.50\%)}{200} }$

= 0.008595057

Now the 3 sigma control limits is

UCL_p = $\bar p$ + 35p

= 0.015 + 3 (0.008595057 )

= 0.04078517

LCL_p = $\bar p$ - 35p

= 0.015 - 3 (0.008595057 )

= 0

hence, the 3 sigma control limits are UCL 0.04078517 and LCL 0 respectively