Management accounting

Question 1

A large chain retailer purchases a certain kind of electronic device from a manufacturer. The manufacturer

indicates that the defective rate of the device is 3%.

a) The inspector randomly picks 20 items from a shipment. What is the probability that there will be

at least one defective item among these 20? (Answer: 0.4562)

b) Suppose that the retailer receives 10 shipments in a month and the inspector randomly tests 20

devices per shipment. What is the probability that there will be exactly 3 shipments each

containing at least one defective device among the 20 that are selected and tested from the

shipment? (Answer: 0.1602)

Question 2

By investing in a particular stock, a person can make a profit in 1 year of $4000/= with probability of 30%

or take a loss of $1000/= with probability of 70%. What is this persons expected mean value of gain?

(Answer $500/=)