Cost-Benefit Analysis for the MIL-STD-1916: A Case Study

Shu-Ing Liu, Ho-Tai Liu

Abstract


The purpose of this study is to numerically investigate the MIL-STD-1916 sampling plans, via the relationships between sampling verification levels and gross profits. The producer’s viewpoint, expected sampling inspection costs, costs due to customer rejection and the final gross profits are evaluated in a pseudo data case study. A hyper-geometric distribution compound with Poisson distribution is used to compute the qualifying probability and the customer rejection probability. The empirical results reveal that the industry must pay more attention to the impact of sampling inspection costs; if commercial quality control is not rigorous, gross profits could be seriously eroded.

Key words: Gross profit; Hyper-geometric distribution; MIL-STD-1916 sampling plans; Poisson distribution; Qualifying probability


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