When a Machine Is Working Properly Only 4% of the Units

question 118

Multiple Choice

When a machine is working properly only 4% of the units it produces are defective.When it slips out of adjustment, the rate jumps to 25% and the machine has to be shut down and adjusted.On 90% of the mornings when production restarts, the machine is in proper adjustment.You turn on the machine this morning and produce the first unit.If the first unit is defective, what is the probability that the machine is in adjustment?

• A).563
• B).360
• C).10
• D).536
• E).618

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Definitions:

Selling Price

The amount for which a product or service is sold to the customer, determined by factors like cost, market demand, and competitive pricing.

Margin Of Safety

The difference between actual sales and sales at the break-even point. It measures the extent to which sales can decline before a business incurs a loss.

Variable Costs

Expenditures that adjust in relation to the business's output or operational intensity.

Fixed Expenses

Costs that do not fluctuate with the volume of sales or production levels, remaining constant even as business activities change.