Suppose That 60 Percent of a Company's Computer Chips Are

question 30

Short Answer

Suppose that 60 percent of a company's computer chips are manufactured in Factory A, while 40 percent are produced in Factory B [P(A) = .60 for a randomly selected chip]. The defect rates for the two factories are 35 percent for Factory A and 25 percent for Factory B. Suppose we now know that the randomly selected chip is defective. Find the probability that the defective chip comes from Factory A.

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Definitions:

Effective Interest Method

A method of calculating the amortized cost of a bond and of allocating interest expense over the bond's life, based on the bond's yield at issuance.

Premium on Bonds Payable

The amount by which a bond's selling price exceeds its face value, reflecting higher-than-market interest rates.

Interest Payable

A liability account on a company's balance sheet representing the amount of interest expense that has been incurred but not yet paid as of the reporting date.

Adjusting Entry

A journal entry made at the end of an accounting period to allocate income and expenditures to the correct period.