Carstab’s customer agreed to test each lot as it was received to determine whether the catalyst would perform the desired function. If the catalyst did not pass the test, the lot would be returned to Carstab. The problem was that only 60% of the lots sent to the customer were passing the test. This meant that, although the product was still good and usable by other customers, an unacceptably high percentage (40%) of the shipments to this particular customer were being returned.