A Machine Is Used in a Production Process

question 29

Essay

A machine is used in a production process. From past data, it is known that 97% of the time the machine is set up correctly. Furthermore, it is known that if the machine is set up correctly, it produces 95% acceptable (non-defective) items. However, when it is set up incorrectly, it produces only 40% acceptable items.
a.An item from the production line is selected. What is the probability that the selected item is non-defective?
b.Given that the selected item is non-defective, what is the probability that the machine is set up correctly?
c.What method of assigning probabilities was used here?

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Definitions:

Work in Process Inventory

The value of materials and products that are partially completed in the manufacturing process.

Overapplied Manufacturing Overhead

A scenario in which the assigned costs for manufacturing overhead are greater than the overhead expenses actually encountered.

Cost of Goods Sold

This is the direct costs attributable to the production of the goods sold in a company, including both materials and labor costs.

Adjusted Cost

The cost that has been modified for adjustments like discounts, returns, or additional charges to reflect the true cost of purchase or production.