Question: J.C. Adams Company

The J.C. Adams Co., a mail-order firm that deals in small gifts, charges a flat rate for postage regardless of the weights of the packages. The flat postage charge is the current postage rate per ounce times 16.90. The company management assumes that in the long run the firm will break even on postage costs. The accounting department disputes the fixed postage charge and suggests that it should be changed. Management, however, wishes to be at least 95% certain that a policy change is justified since it may incur postage losses or be unattractive to potential customers. Further, management wishes to be 99% certain that if a policy change is made, the change will not incur losses due to insufficient postage charges to customers. Management decides to take a random sample of the weights of 100 packages mailed this month and base the decision on the sample results. The sample indicates a mean weight of 17.8 ounces and a standard deviation of 3.2 ounces.

Determine the action to be taken by J. C. Adams Company, if any, and explain your conclusion.