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Hello Sir
Please explain these lines regarding statistical significance model :Statistical significance model:-
Historical data are used to calculate both a standard as an expected average and the expected standard deviation around this average when the process is under control. By assuming that variances that occur are normally distributed around this average, a variance will be investigated if it is more than a distance from the expected average that the estimated normal distribution suggests is likely if the process is in control.
Actually I am not getting what is statistical significance model exactly say?
Thank youI will explain the idea to you, but you cannot be asked any calculations on this at all – the normal distribution and the use of standard deviations is not in the F5 syllabus.
What the idea is, is that ‘large’ variances will be investigated but only large ones – we will not bother with small variances. We would always expect there to be variances – it would be a miracle if actual results were exactly the same as in the budget. If we look at the past and measure what variances have occurred before then we can decide what is ‘large’. The normal distribution is a way of estimated the probability of variances exceeding a certain amount and so we can use that to decide what is ‘large’. (For example, we might decide that if the probability of a variance exceeding a certain figure is 5% then we will investigate any variances over that limit).
I hope that makes sense, but again you cannot in F5 be examined on normal distribution and standard deviations.
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