The Hawkins Company Randomly Samples 10 Items from Every Large

question 88

True/False

The Hawkins Company randomly samples 10 items from every large batch before the batch is packaged and shipped. According to the contract specifications, 5 percent of the items shipped can be defective. If the inspectors find 1 or fewer defects in the sample of 10, they ship the batch without further inspection. If they find 2 or more, the entire batch is inspected. Based on this sampling plan, the probability that a batch that meets the contract requirements will end up being 100 percent inspected is approximately .0746.

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Definitions:

Manufacturing Costs

Expenses directly related to the production of goods, including materials, labor, and overhead costs.

Direct Materials

Raw materials that are directly traceable to the manufacturing of a product and are a part of the finished product.

Fixed Manufacturing Overhead

Fixed manufacturing overhead costs are those production expenses that do not change with the volume of production, such as rent and salaries.

Absorption Costing

A bookkeeping system that integrates all costs, both direct and indirect, associated with the production of a product into its final cost.