The Quality Control Manager for the NKA Inc

question 90

Essay

The quality control manager for the NKA Inc.must decide whether to accept (alternative 1),further analyze (alternative 2),or reject (alternative 3)the shipment (lot)of incoming material.The historical data indicates that there is 30% chance that the lot is poor quality (S₁),50% chance that the lot is fair quality (S₂),and 20% chance that the lot is good quality (S₃).Assume the following payoff table is available.The values in the payoff table are in thousands of dollars. What alternative action should be selected according to maximin criterion?

Recognize the impact of inventory cost flow assumptions (LIFO, FIFO, and weighted average) on financial statements.

Identify the components and significance of inventory carrying costs.

Understand the significance of considering inventory losses and "shrinkage" in inventory accounting.

Recognize the role of modern technology in the adoption of inventory systems.

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Definitions:

Short Run

A period in economics during which at least one factor of production is fixed, limiting the ability to increase production in response to increased demand.

Profitable

A financial status where the income generated from business activities exceeds the expenses, taxes, and costs associated with maintaining the business.

Marginal Revenue

The additional revenue that a company earns from selling one more unit of a product or service.

Marginal Cost

The rise in expense associated with the production of an extra unit of a product or service.