AAA Co Operates Distribution Centers in the Midwest

question 5

Short Answer

AAA Co. operates distribution centers in the Midwest. Three of their centers were recently audited to determine if they are in compliance with company standard billing procedures. According to the auditing firm, a billing had an equal probability of being from each of the three centers. A random sample of the audited billings had the following distribution.
Center 1: 385 billings
Center 2: 305 billings
Center 3: 210 billings
What are the degrees of freedom for the χ² test?

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Definitions:

Direct Materials Budget

An estimation of the quantity and cost of direct materials necessary for production, matching the production budget.

Beginning Inventory

The value of goods available for sale at the start of an accounting period.

Production Needs

The requirements necessary to manufacture products, including materials, labor, and machinery.

Ending Inventory

The value of goods available for sale at the end of an accounting period, calculated as the sum of beginning inventory plus purchases minus cost of goods sold.