Question

1:28 vl En Exit LIIL Reu dilel you 11111511 dll Lile Yues LIUIIS. • Late submission will not be marked. • Students can see the correct answers in Canvas on 30th Mar 2020 and thereafter. Question 8 3 pts Using samples of 200 credit card statements, an auditor found the following: 2 3 4 5 6 Sample 1 Number of 6 errors 4 5 19 7 5 Determine the 3-sigma LOWER control limit using the data above. • Previous Submit Quiz

Answer 1

ANSWER.

Step1- First calculate the average which is =sum of numbers/numbers of numbers= {(6+4+5+9+7+5=36) / 6}= 6

Step 2- Then calculate spread between data points which is varience. It can be calculated by the sum of the square of the difference between each data and average(mean) divided by number of observations.

the first difference square = (6 - 6)2 = 0

the second difference square (4 - 6)2= 4

And so on (5 - 6)2= 1,  (9 - 6)2 = 9, (7 - 6)2= 1,  (5 - 6)2 = 1

The sum of difference square of all 6 data points = 17

The varience = sum of diffrence/ number of observations= 17/6= 2.8333

Step 3 Calculate the standard deviation which is simply the square root of varience.

Standard deviation = √2.8333=1.6832

Step 4 Calculate three sigma (3* standard deviation) and for upper limit add this with mean and for lower limit subtract this from mean.

lower limit = Mean -three sigma = (6)-(3* 1.6832)= 6-5.0496= 0.9504