Epsilon Manufacturing Company Makes a Specialized Electronic Product Used in the Automotive

question 53

Multiple Choice

Epsilon Manufacturing Company makes a specialized electronic product used in the automotive industry.This product has 4 components, each of which could be defective.So the total number of defects of this product can be 0, 1, 2, 3, or 4.The following table provides the probabilities of the number of defects: Number of defects Probability
0 .508
1 .302
2 .105
3 .080
4 .005
The mean number of defects is _______.

• A).75
• B).77
• C).80
• D).85
• E).87

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Definitions:

Operating Leverage

A measure of how sensitive a company's operating income is to changes in revenue.

Marginal Tax Rate

The rate of tax applied to the next dollar of taxable income, indicating how much tax will be paid on an additional dollar earned.

Operating Cash Flow

A measure of the cash generated by a company's normal business operations.

DOL

Degree of Operating Leverage, a ratio that measures how a company's operating income changes with a change in sales, indicating the effects of fixed costs on profits.