In Acceptance Sampling, When the Random Sample Passes the Buyer's

question 185

Multiple Choice

In acceptance sampling, when the random sample passes the buyer's incoming test (low number of defects found) , the next action taken is to:

• A) accept the entire lot of incoming materials.
• B) do additional testing to reduce the risk of accepting a bad-quality lot.
• C) place the lot on hold and wait for additional lots from this seller to be tested to assure consistent good quality.
• D) 100% inspect the lot because some defects were found.

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Definitions:

Variable Cost

Costs that change in proportion to the level of production or sales activity, such as raw materials and direct labor costs.

Fixed Costs

Fixed overheads that stay the same no matter how much is produced or sold, including rental fees or staff salaries.

Margin of Safety

The difference between actual or projected sales and the break-even point, indicating the amount by which sales can drop before a business incurs a loss.

Break-even Point

The level of sales at which total revenues equal total costs, and the business makes no profit but also incurs no loss.