Question: The accounting system has reported a large unfavorable variance for Buffett Companys production process. Conducting an investigation costs $7,000. If the process is actually out

The accounting system has reported a large unfavorable variance for Buffett Company’s production process. Conducting an investigation costs $7,000. If the process is actually out of control, the cost of correction will be $10,000 and the benefit of correction will be $40,000. The probability is .30 that the large negative variance indicates the process is out of control.
Should management investigate the process?

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