5-2 Scenario Analysis: Computer Chips

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?