Your Company's Internal Auditor Believes That 10% of the Company's

question 73

Multiple Choice

Your company's internal auditor believes that 10% of the company's invoices contain errors.To check this theory,20 invoices are randomly selected and 5 are found to have errors. What is the probability that of the 20 invoices written,five or more would contain errors if the theory is valid?

• A).0433
• B).0319
• C).9567
• D).8660

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Definitions:

Predetermined Overhead Rate

A predetermined overhead rate is calculated by dividing estimated overhead costs by an allocation base, such as direct labor hours, used to allocate overhead costs to products or job orders.

Estimated Annual Costs

A forecast of the total costs a company expects to incur over a year, including fixed and variable expenses.

Expected Annual Activity

The anticipated level of operations or production for a business during a one-year period.

Predetermined Overhead Rate

A rate used to assign manufacturing overhead costs to products or job orders, calculated based on estimated overhead costs and an allocation base.