In Terms of the Variance-Investigation Decision, an "Indifference Probability," P

question 48

Essay

In terms of the variance-investigation decision, an "indifference probability," p, of 10%
A) Refers to the probability of a non-random (i.e., systematic variance) occurring.
B) Means that there is a 10% probability that management will make an incorrect decision.
C) Implies that if the probability of a nonrandom variance is less than 10% the variance should be investigated.
D) Implies a 90% probability of not taking corrective action after the variance is investigated.
E) Suggests that management a 90% probability that management would be indifferent between investigating and not investigating the variance.

• A) Refers to the probability of a non-random (i.e., systematic variance) occurring.
• B) Means that there is a 10% probability that management will make an incorrect decision.
• C) Implies that if the probability of a nonrandom variance is less than 10% the variance should be investigated.
• D) Implies a 90% probability of not taking corrective action after the variance is investigated.
• E) Suggests that management a 90% probability that management would be indifferent between investigating and not investigating the variance.