KK accounting firm has noticed that of the companies it audits, 85% show no inventory shortages, 10% show small inventory shortages and 5% show large inventory...

      

KK accounting firm has noticed that of the companies it audits, 85% show no inventory shortages, 10%
show small inventory shortages and 5% show large inventory shortages. KK firm has devised a new
accounting test for which it believes the following probabilities hold:
P (Company will pass test/no shortage) = 0.90
P (Company will pass test/small shortage) = 0.50
P (Company will pass test/large shortage) = 0.20
Required:
i) Determine the probability if a company being audited fails this test has large or small inventory
shortage.
ii) If a company being audited passes this test, what is the probability of no inventory shortage?

  

Answers


Mutiso
The probability tree is as follows
probtree812712.png
Mutiso answered the question on December 8, 2018 at 04:13


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