CFA Practice Question

There are 410 practice questions for this study session.

CFA Practice Question

Two suppliers offer a machine part with the 1" diameter required by a manufacturer. Samples indicate that supplier A's product has a standard deviation of 0.12 in and supplier B's product has a standard deviation of 0.15 in. Which of the following statements is true?

A. A offers a more homogeneous product.
B. The standard deviation has no relationship to the quality of the product.
C. Only the mean is important in buying the machine part.
Correct Answer: A

User Contributed Comments 5

User Comment
surob In this case, "homogeneous" means the product with less mistakes, w/lower dispersion from the mean diameter.
amamed213 Can someone explain more ?
padre40 less variation between the two similar products (CV formula)
Saxonomy Basically means when they studied (for example) 100 parts that Supplier A and Supplier B each sold, neither of the two Suppliers produced 100 parts with exactly the same diameter (though they were close). However, supplier A's supplied part (overall) were closer to the actual 1" than Supplier B. Lower standard deviation means lower instances of error/mistake.
jonan615 @surob, "homegeneous" in this instance isn't referring to mistakes. It is referring to tolerances, the permissible limit or limits in variance that engineers measure to prevent or ensure a machine performs as intended.
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