What is 'Acceptance Sampling'

Acceptance sampling is a statistical measure used in quality control that allows a company to measure the quality of a batch of products by selecting a specified number of products for testing. The quality of these products will be viewed as the quality level for the group of products. 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 the 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.

BREAKING DOWN '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 the 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.

RELATED TERMS
  1. Sampling

    A process used in statistical analysis in which a predetermined ...
  2. Representative Sample

    Representative Sample is a subset of a statistical population ...
  3. Sample Size Neglect

    Sample size neglect occurs when an individual infers too much ...
  4. Attribute Sampling

    Attribute sampling is a statistical method typically used in ...
  5. Central Limit Theorem - CLT

    A statistical theory that states that given a sufficiently large ...
  6. Acceptable Quality Level - AQL

    The acceptable quality level (AQL) is a statistical measurement ...
Related Articles
  1. Personal Finance

    Birch Box Review: Is It Worth It?

    Learn more about the convenience of the subscription beauty box industry, and discover why the Birchbox company in particular has become so popular.
  2. Investing

    Hypothesis Testing in Finance: Concept & Examples

    When you're indecisive about an investment, the best way to keep a cool head might be test various hypotheses using the most relevant statistics.
  3. Investing

    Using Historical Volatility To Gauge Future Risk

    Use these calculations to uncover the risk involved in your investments.
  4. Personal Finance

    Banker's Acceptance 101

    A banker's acceptance, or a negotiable time draft a bank guarantees to pay at a predetermined date, is a common way of financing international trade activity.
  5. Investing

    How Vanguard Index Funds Work

    Learn how Vanguard index funds work. See how the index sampling technique allows Vanguard to charge low expense ratios that can save investors money.
  6. Investing

    A Quality Way to Reduce Volatility

    The quality factor is a smart beta strategy to consider when volatility rises.
  7. Financial Advisor

    Smart Beta: How Does Quality Factor In?

    One of the factors used in smart beta strategies is quality. Here's a look at this popular factor and the ETFs that use it.
  8. Investing

    Oil & Gas Sector: Credit and Valuation Ratios

    Credit and valuation ratios play an important role in analyzing oil and gas companies.
  9. Financial Advisor

    5 Powerful Website Tools Every Advisor Needs

    Top-performing financial advisor websites have these five features in common.
RELATED FAQS
  1. What are the benefits of financial sampling?

    Learn more about how financial sampling is used to determine whether or not inaccurate or fraudulent information exists in ... Read Answer >>
  2. What is the difference between a simple random sample and a stratified random sample?

    Learn about the differences between simple random sampling and stratified random sampling, and the advantages of each method. Read Answer >>
  3. How do I calculate the standard error using Matlab?

    Learn how to calculate the standard error for a sample statistical measure, such as the sample mean, using standard Matlab ... Read Answer >>
  4. What are the disadvantages of using a simple random sample to approximate a larger ...

    Learn what a simple random sample is, how researchers use it as a statistical tool and the disadvantages it carries when ... Read Answer >>
  5. What is the difference between the standard error of means and standard deviation?

    Learn about the difference between the standard error of the mean and the standard deviation and how standard deviation is ... Read Answer >>
  6. Is the Bureau of Labor Statistics accurate?

    Read this brief analysis of the accuracy of Bureau of Labor Statistics, including a summary of the types of reports issued ... Read Answer >>
Hot Definitions
  1. Treasury Yield

    Treasury yield is the return on investment, expressed as a percentage, on the U.S. government's debt obligations.
  2. Return on Assets - ROA

    Return on assets (ROA) is an indicator of how profitable a company is relative to its total assets.
  3. Fibonacci Retracement

    A term used in technical analysis that refers to areas of support (price stops going lower) or resistance (price stops going ...
  4. Ethereum

    Ethereum is a decentralized software platform that enables SmartContracts and Distributed Applications (ĐApps) to be built ...
  5. Cryptocurrency

    A digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of ...
  6. Financial Industry Regulatory Authority - FINRA

    A regulatory body created after the merger of the National Association of Securities Dealers and the New York Stock Exchange's ...
Trading Center