If I = the Cost of Conducting an Investigation, C

question 107

Essay

If I = the cost of conducting an investigation, C = the estimated cost to correct the cause of a variance, and L = loss associated with not investigating a variance, what is the formula for determining the indifference probability, p?
A) p = I/(L + C).
B) p = (L − C)/I.
C) p = (L + C)/I.
D) p = I/(L − C).

• A) p = I/(L + C).
• B) p = (L − C)/I.
• C) p = (L + C)/I.
• D) p = I/(L − C).

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Definitions:

Misrepresenting Solvency

Falsely presenting a company's or individual's financial stability or ability to pay debts, often to secure loans or delay bankruptcy.

Reclaim

The process of getting something back or asserting one's rights to a previously ceded property or state.

Replevin

A legal remedy involving the recovery of specific goods or chattels wrongfully taken or detained, allowing the rightful owner to regain possession.

Unlawfully Withheld

Illegally retained or kept possession of something that should have been returned or released.