Acceptance Sampling

Filed Under » ,
Dictionary Says

Definition of 'Acceptance Sampling'

A statistical measure used in quality control. A company cannot test every one of its products due to either ruining the products, or the volume of products being too large. Acceptance sampling solves this by testing a sample of product for defects. The process involves batch size, sample size and the number of defects acceptable in the batch. This process allows a company to measure the quality of a batch with a specified degree of statistical certainty without having to test every unit of product. The statistical reliability of a sample is generally measured by a t-statistic.
Investopedia Says

Investopedia explains 'Acceptance Sampling'

Probability is a key factor in acceptance sampling, but it is not the only factor. If a company makes a million products and tests 10 units with one default, an assumption would be made on probability that 100,000 of the 1,000,000 are defective. However, this could be a grossly inaccurate representation. More reliable conclusions can be made by increasing the batch size higher than 10, and increasing the sample size by doing more than just one test and averaging the results. When done correctly, acceptance sampling is a very effective tool in quality control.

Articles Of Interest

  1.

    How Risk Free Is The Risk-Free Rate Of Return?

    This rate is rarely questioned - unless the economy falls into disarray.

  2. Top 4 Most Scandalous Insider Trading Debacles

    Here we look at some of the landmark incidents of insider trading.

  3. Nobel Winners Are Economic Prizes

    Before you try to profit from their theories, you should learn about the creators themselves.

  4. Regression Basics For Business Analysis

    This tool is easy to use and can provide valuable information on financial analysis and forecasting. Find out how.

  5. The Copper King: An Empire Built On Manipulation

    Find out how Yasuo Hamanaka's actions in the copper market forever changed the rules for commodity traders.

  6. 7 Controversial Investing Theories

    We take a closer look at the theories that attempt to explain and influence the market.

  7. Breaking Down The Geometric Mean

    Understanding portfolio performance, whether for a self-managed, discretionary portfolio or a non-discretionary portfolio, is vital to determining whether the portfolio strategy is working or ...

  8. Private Equity A Trendsetter For Stocks

    In this article, we'll show you how private equity sets the trend for stocks everywhere.

  9. Tracking Volatility: How The VIX Is Calculated

    When market volatility spikes or stalls, newspapers, websites, bloggers and television commentators all refer to the VIX®. Formally known as the CBOE Volatility Index, the VIX is a benchmark ...

  10. Giants of Finance: Charles Dow

    Find out how this financial visionary helped everyday people enter the world of finance.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Racketeering

    Racketeering refers to criminal activity that is performed to benefit an organization such as a crime syndicate. Examples of racketeering activity include...

  2. Lawful Money

    Any form of currency issued by the United States Treasury and not the Federal Reserve System, including gold and silver coins, Treasury notes, and Treasury bonds. Lawful money stands in contrast to fiat money, to which the government assigns value although it has no intrinsic value of its own and is not backed by reserves.

  3. Fast Market Rule

    A rule in the United Kingdom that permits market makers to trade outside quoted ranges, when an exchange determines that market movements are so sharp that quotes cannot be kept current.

  4. Absorption Rate

    The rate at which available homes are sold in a specific real estate market during a given time period.

  5. Yellow Sheets

    A United States bulletin that provides updated bid and ask prices as well as other information on over-the-counter (OTC) corporate bonds...

  6. Bailment

    The contractual transfer of possession of assets or property for a specific objective.
Trading Center