Example: Speedboat Engines
The engines made by Ford for speedboats had an average power of 220 horsepower (HP) and standard deviation of 15 HP.
1. A potential buyer intends to take a sample of four engines and will not place an order if the sample mean is less than 215 HP. What is the probability that the buyer will not place an order?
We want to find P(y¯y¯ < 215) = ?
Answer: We need to know whether the distribution of the population is normal since the sample size is too small: n = 4 (less than 30 which is required in the central limit theorem). If someone confirms that the population normal, then we can proceed since the sampling distribution of the mean of a normal distribution is also normal for all sample sizes.
If the population follows a normal distribution, we can conclude that y¯y¯ has a normal distribution with mean 220 HP and a standard error of σ/n√=15/4√=7.5HPσ/n=15/4=7.5HP.
P(y¯y¯ < 215)
= P(Z < (215 - 220) / 7.5)
= P(Z < -0.67)
= 0.2514
If the customer just samples four engines, the probability that the customer will not place an order is 25.14%.