MPC makes personal computers that are then sold directly over the phone and over the Internet. One of the most critical factors in the success of PC makers is how fast they can turn their inventory of parts. Faster inventory turns mean lower average inventory cost. Recently at a meeting, the vice president (VP) of manufacturing said that there is no reason to continue offering hard disk drives that have less than a 250-GB storage capacity since only 10% of MPC customers ask for the smaller hard disks. After much discussion and debate about the accuracy of the VP’s figure, it was decided to sample 100 orders from the past week’s sales. This sample revealed 14 requests for drives with less than 250-GB capacity.
a. Determine the probability of finding 14 or more requests like this if the VP’s assertion is correct. Do you believe that the proportion of customers requesting hard drives with storage capacity is as small as 0.10? Explain.
b. Suppose a second sample of 100 customers was selected. This sample again yielded 14 requests for a hard drive with less than 250 GB of storage.
Combining this sample information with that found in part a, what conclusion would you now reach regarding the VP’s 10% claim? Base your answer on probability.