Question

An appliance manufacturer wants to contract with a repair shop to handle the authorized repair in The City. The company has set an acceptable range of repair time of 50 minutes to 90 minutes. Two firms have submitted bids for the work. In test trials, one firm had a mean repair time of 74 minutes with a standard deviation of 4.0 minutes, and the other firm had a mean repair time of 72 minutes with a standard deviation of 5.1 minutes.

a)Which firm would you choose?
b) Why?

Answer 1

a) I would chose the first firm with mean repair time of 74 minutes and standard deviation of 4 minutes

b) The reason for this is that firm 1 has a lesser standard deviation than firm 2. Standard deviation gives us an idea on how spread out a data is, in this case the repair hours, in trials. A greater standard deviation means there is a greater spread in data, or greater deviation of individual repair hours from mean. This translates to a lack in consistency and that's a significant factor for me. Since the mean repair hours of both the firms are almost the same, I as a manufacturer look for consistency in the trials, which is evidently better in firm 1 owing to their lesser spread in the data from mean.

Hence I chose firm 1 which has lower standard deviation.

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