If There Is a 90 Percent Chance That an Observed

question 19

Essay

If there is a 90 percent chance that an observed variance is random, the cost of conducting an investigation is $1,000, the cost to correct a variance if the investigation reveals a nonrandom cause, and the amount of loss a company expects to incur if it does not investigate a variance that had a nonrandom cause is $30,000, what is the expected cost (to the nearest whole dollar) of not investigating the variance?
A) $30,000.
B) $1,500.
C) $0.
D) $3,900.
E) $3,000.

• A) $30,000.
• B) $1,500.
• C) $0.
• D) $3,900.
• E) $3,000.

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Definitions:

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