The Traditional View Is That the Optimum Level of Inspection

question 45

Multiple Choice

The traditional view is that the optimum level of inspection is where the

• A)cost of inspection is minimum.
• B)cost of passing defectives is minimum.
• C)total cost of inspection and defectives is maximum.
• D)total cost of inspection and defectives is minimum.
• E)difference between inspection and defectives costs is minimum.

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Definitions:

Assets

Resources owned by a company that have economic value and can be converted into cash.

Liabilities

Financial obligations or debts that a company owes to external parties.

Residual Equity

The amount of equity remaining for shareholders after all liabilities have been deducted from total assets.

Owner's Equity

The assets left over in a business once liabilities are cleared, showing the equity of owners or shareholders.