TUM School of Management

Production and Supply Chain Management

Prof Martin Grunow

Technische Universitt Mnchen

Quality Engineering & Management

Session 5.1: Confidence Intervals

Dr. Holly Ott

Production and Supply Chain Management
Chair: Prof. Martin Grunow
TUM School of Management

Holly Ott

Quality Engineering & Management Module 5

TUM School of Management

Production and Supply Chain Management
Prof Martin Grunow

Technische Universitt Mnchen

Learning Objectives
Describe how confidence intervals are used to make inferences
about population parameters.
Calculate confidence intervals for the mean of a normally
distributed population with known standard deviation.
Understand the effects of varying the sample size, standard
deviation and confidence level.

Holly Ott

Quality Engineering & Management Module 5

TUM School of Management

Production and Supply Chain Management
Prof Martin Grunow

Technische Universitt Mnchen

The Point Estimate

The value of an estimator observed in a single sample is called a
point estimate
The process mean can estimated using the
sample average, X-bar:
The process standard deviation can be
estimated using the sample standard
deviation, S:

Holly Ott

X =

n
2

S=

Quality Engineering & Management Module 5

(Xi X )
n 1

TUM School of Management

Production and Supply Chain Management
Prof Martin Grunow

Technische Universitt Mnchen

Confidence Intervals

Reprinted with permission from Professor David Gallagher, Virginia Tech

http://www.webapps.cee.vt.edu/ewr/environmental/teach/smprimer/intervals/interval.html, accessed on 03.02.2015

Holly Ott
Quality Engineering & Management Module 5

TUM School of Management

Production and Supply Chain Management
Prof Martin Grunow

Technische Universitt Mnchen

Confidence Intervals
The point estimate, being one observation of a random variable, is
not of much value, especially from small size samples
So we resort to interval estimation where we create an interval
(using the point estimate) such that the probability the parameter of
interest lies in that interval is (1 ).
We call such an interval (1 )100% confidence interval (C.I.) for
the parameter.

2012 from "A First Course in Quality Engineering: Integrating Statistical

and Management Methods of Quality" by K.S. Krishnamoorthi. Reproduced
by permission of Taylor and Francis Group, LLC, a division of Informa plc.
Holly Ott

Quality Engineering & Management Module 5

TUM School of Management

Production and Supply Chain Management
Prof Martin Grunow

Technische Universitt Mnchen

Confidence Intervals
Orchard: 20 apple trees
X = # Apples per Bucket
From 1 tree
(10 buckets, n = 10):
X-bar = 6 apples/bucket
S = 2.8 apples/bucket
Confidence Level: 95%
Reprinted with permission from Professor David Gallagher, Virginia Tech
http://www.webapps.cee.vt.edu/ewr/environmental/teach/smprimer/intervals/interval.html, accessed on 03.02.2015

Holly Ott
Quality Engineering & Management Module 5

TUM School of Management

Production and Supply Chain Management
Prof Martin Grunow

Technische Universitt Mnchen

Confidence Intervals

Reprinted with permission from Professor David Gallagher, Virginia Tech

http://www.webapps.cee.vt.edu/ewr/environmental/teach/smprimer/intervals/interval.html, accessed on 03.02.2015

Holly Ott
Quality Engineering & Management Module 5

TUM School of Management

Production and Supply Chain Management
Prof Martin Grunow

Technische Universitt Mnchen

Practice
Now let's look a little more closely at what a
confidence interval means.
Please look at the next "Practice" module
before continuing with the lecture.

Holly Ott

Quality Engineering & Management Module 5