The accountant and production manager of the Merrick Company have agreed that the following values are applicable in the investigation of a certain process:

{Required:}
Assuming that the subjective probability that the process may be out of control is . 10 , determine whether or not an investigation of the process is justified.
Compute that calculated minimum probability for the process to be out of control at which one would be indifferent as to whether or not to investigate the process.

Transcribed Image Text:

Cost of investigation....... .......$ 400 Cost of remedy action, if process is out of order.... 1,600 Anticipated savings.......... 5,000