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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