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Sample StatisticsUsed to estimate population parametersSampling DistributionThe distribution of all possible values of a statistic for a given sample size – given that the sample is randomly selectedSample meanIs an unbiased estimatorIt’s an unbiased estimator if the difference between the estimator and the parameter becomes smaller as sample becomes biggerCentral Limit TheoremAs the sample size gets large enough the sampling distribution becomes almost normal regardless of shape of populationΠ = the proportion of the population having some characteristicSample proportion (p)Provides an estimate of ΠP = x/n (number of successes in the sample/sample size)Point EstimateA single number used to estimate an unknown population parameterConfidence IntervalProvides additional information about variabilityAlso known as an interval estimateProvides more information about a population characteristic than does a point estimateGives us a range of values and gives information about closeness to unknown population parametersPoint Estimate + - (Critical Value)(Standard Error)The larger the confidence interval is, the wider the data is going to be*****Use T Table if:Population standard deviation is unknownSee an “s”Sample standard deviation is involvedMargin of Error:The amount added and subtracted to the point estimate to form the confidence intervalE = z (standard deviation/the square root of n)Standard error x critical value gives you margin of errorChanging the Sample Size:Increases in the sample size reduce the width of the confidence intervalLarger sample size means a smaller sampling errorDecision MakingKnowing if to decide, then when and what to decideIncludes understanding the consequences of decisionsThe Payoff TableA method of organizing and illustrating the payoffs from different decisions given various states of natureA payoff is the outcome of the decisionMaximax Criterion (optimistic)Choose decision with the maximum of the maximum payoffsMinimin CriterionChoose decision with the minimum of the minimum payoffsMaximin CriterionChoose decision with the maximum of the minimum payoffsExpected ValueA weighted average of decision outcomes in which each future state of nature is assigned a probability of occurrenceExpected Maximum ValueMultiply probability x outcome/payoffChoose the decision with the highest expected maximum valueEVPIMaximum value with perfect information to the decision maker(expected value with perfect information)VPIMaximum amount that an investor would pay to purchase perfect information(Value of perfect information)VPI = EVPI – Largest EMV (without perfect information)RegressionPredict value of dependent variableGot to have a relationshipCorrelationStrength of relationship, -1 to 1CausationDid independent variable cause change in dependent variable?Just because there’s a correlation doesn’t mean there is a causationQualityFitness for use as designed to be used, definition of quality is defined by the customer, not the companyMeasure of goodness that is inherent to a product or serviceProduct Quality DimensionsProduct based- found in the product attributesUser based – if customer is satisfiedManufacturing Based – conform to specsValue Based – perceived as providing good value for the priceDemings 14 PointsCreate constancy of purposeAdopt philosophy of preventionCease mass inspectionSelect a few suppliers based on qualityConstantly improve system and workersInstitute worker trainingInstill leadership among supervisorsEliminate fear among employeesEliminate barriers between departmentsEliminate slogansRemove numerical quotasEnhance worker prideInstitute vigorous training and education programsDevelop a commitment from top management to implement these 13 pointsThe Deming Wheel (or PDCA Cycle)Plan, Do, Study/Check, ActSix SigmaQuality management program that measures and improves the operational performance of a company by identifying and correcting defects in the company’s processes and productsDefine, Measure, Analyze, Improve, ControlStarted by Motorola (made famous by General Electric)ISO 9000 FamilyFamily of standards represents an international consensus on good quality management practices. It consists of standards and guidelines relation to quality management systems and related supporting standardsStudy Guide 06/20/2013Sample Statistics- Used to estimate population parametersSampling Distribution- The distribution of all possible values of a statistic for a given sample size – given that the sample is randomly selectedSample mean- Is an unbiased estimator - It’s an unbiased estimator if the difference between the estimator and the parameter becomes smaller as sample becomes biggerCentral Limit Theorem- As the sample size gets large enough the sampling distribution becomes almost normal regardless of shape of populationΠ = the proportion of the population having some characteristic Sample proportion (p)- Provides an estimate of Π - P = x/n (number of successes in the sample/sample size)Point Estimate- A single number used to estimate an unknown population parameterConfidence Interval- Provides additional information about variability - Also known as an interval estimateo Provides more information about a population characteristic than does a point estimate- Gives us a range of values and gives information about closeness tounknown population parameters - Point Estimate + - (Critical Value)(Standard Error)- The larger the confidence interval is, the wider the data is going to be*****Use T Table if:- Population standard deviation is unknown - See an “s”- Sample standard deviation is involved Margin of Error:- The amount added and subtracted to the point estimate to form theconfidence interval - E = z (standard deviation/the square root of n)- Standard error x critical value gives you margin of errorChanging the Sample Size:- Increases in the sample size reduce the width of the confidence interval- Larger sample size means a smaller sampling errorDecision Making- Knowing if to decide, then when and what to decide- Includes understanding the consequences of decisionsThe Payoff Table- A method of organizing and illustrating the payoffs from different decisions given various states of nature- A payoff is the outcome of the decisionMaximax Criterion (optimistic)- Choose decision with the maximum of the maximum payoffsMinimin Criterion- Choose decision with the minimum of the minimum payoffsMaximin Criterion- Choose decision with the

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