Economic Design of a Two-Sided Two-Stage Screening Procedure with a Prescribed Outgoing Quality

An economic two-stage screening procedure is presented when both lower and upper specification limits are given on the performance variable. A screening variable which is highly correlated with the performance variable is used first to decide whether an item should be accepted, rejected, or undecided. The performance variable is then used to classify the undecided items. The two variables are assumed to be jointly normally distributed. A cost model is constructed on the basis of six cost components; inspection costs of screening and performance variables and costs caused by type I and type II misclassification errors related with lower and upper specification limits. Optimal cutoff values on the screening variable are determined so that the average outgoing quality exceeds a prespecified level. Solution methods are provided for both known-parameter and unknown-parameter cases.