An Automobile Manufacturer Obtains the Microprocessor Used to Regulate Fuel

question 87

Multiple Choice

An automobile manufacturer obtains the microprocessor used to regulate fuel consumption in its automobiles from three microelectronic firms: A, B, and C. The quality-control department of the company has determined that 2% of the microprocessors produced by firm A are defective, 1.5% of those produced by firm B are defective, and 3% of those produced by the firm C are defective. Firms A, B, and C supply 40%, 30%, and 30%, respectively, of the microprocessors used by the company. What is the probability that a randomly selected automobile manufactured by the company will have a defective microprocessor?

• A) 0.02850
• B) 0.01650
• C) 0.02150
• D) 0.02650
• E) 0.01350

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Definitions:

Underapplied Overhead

Occurs when the allocated manufacturing overhead costs are less than the actual overhead costs incurred.

Direct Labour Cost

The total cost of all the labor force that is directly involved in the manufacturing of a product or the provision of a service.

Predetermined Overhead Rate

An estimated overhead rate calculated before the manufacturing process begins, used to assign overhead costs to products.

Direct Materials Cost

The expenditure on raw materials that can be directly attributed to the production of a specific product.