Question

The internal auditing staff of a local manufacturing company performs a sample audit each quarter to estimate the proportion of accounts that are current (between 0 and 60 days after billing). The historical records show that over the past 8 years 70 percent of the accounts have been current. Determine the sample size needed in order to be 95% confident that the sample proportion of the current customer accounts is within .03 of the true proportion of all current accounts for this company.

A. 1842

B. 1548

C. 897

D. 632

E. 1267

Answer 1

Solution :

Given that,

= 70%=0.70

1 - = 1 - 0.70 = 0.30

margin of error = E =0.03

At 90% confidence level

= 1 - 0.90 = 0.10

/2 =0.05

Z/2 = 1.645 ( Using z table )

Sample size = n = (Z/2 / E)2 * * (1 - )

= (1.645 / 0.03)2 * 0.70 * 0.30

=632

Sample size = 632