Prestridge Corporation Is a Service Company That Measures Its Output

question 82

Multiple Choice

Prestridge Corporation is a service company that measures its output by the number of customers served. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results of operations for August. When the company prepared its planning budget at the beginning of August, it assumed that 31 customers would have been served. However, 29 customers were actually served during August.The variance for net operating income in the Revenue and Spending Variances column of a report comparing actual results to the flexible budget for August would have been closest to:

• A) $4,100 U
• B) $4,100 F
• C) $1,100 U
• D) $1,100 F

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Definitions:

Type I Error

The mistake of rejecting the null hypothesis when it is actually true, falsely indicating a significant effect or difference.

Type II Error

A Type II error occurs when a statistical test fails to reject a false null hypothesis, mistakenly accepting a false premise.

Quality Control

The process of ensuring the standards and requirements of products or services are met through consistent measurements and testing.

P-Value

A statistical measure indicating the probability of obtaining test results at least as extreme as the ones observed during the test, assuming that the null hypothesis is true.