The Preventable Monthly Loss at a Company Has a Normal

question 116

Multiple Choice

The preventable monthly loss at a company has a normal distribution with a mean of $4700 and a standard deviation of $40. A new policy was put into place, and the preventable loss the next month was $4460. What inference can you make about the new policy?

• A) Because the probability that the monthly loss would be as low as $4460 is small, the new policy is working.
• B) Because the probability that the monthly loss would be as low as $4460 is not very small, the new policy is not working.
• C) While the probability that the monthly loss would be as low as $4460 is small, it is not unexpected.
• D) The new policy is probably less effective than the one it replaced.

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Definitions:

Net Income

The remaining profit for a company after deducting taxes and expenses from the revenue.

Consolidation Entry

A journal entry used in the preparation of consolidated financial statements to eliminate intercompany transactions and balances.

Retained Earnings

The portion of net income that is retained by the company rather than distributed to its shareholders as dividends.

Equity Method

An accounting technique used to record investments in other companies, recognizing income based on the investee's profit or loss.