O https://newconnect.mheducation.com/flow/connect.htm The desire to maximize pro
ID: 1155108 • Letter: O
Question
O https://newconnect.mheducation.com/flow/connect.htm The desire to maximize profits can work against racial and other types of discrimination. To see this, consider two equally productive accountants named Ted and Jared. Ted is black, and Jared is white. Both can complete 10 audits per month. a. Suppose that for any accounting firm that hires either Ted or Jared, all the other costs of performing an audit (besides paying either Ted or Jared) come to $1,000 per audit. If the going rate that must be paid to hire an accountant is $8,000 per month, how much will it cost an accounting firm to produce one audit if it hires either Ted or Jared to do the work? b. If the market price that accounting firms charge their clients for an audit is $1,900, what would the accounting profit per audit be for a firm that hired either Ted or Jared? What is the profit rate as a percentage? Instructions: Round your answer to 2 decimal places.Explanation / Answer
Solution:-
(a) All other costs of performing one audit = $1,000
Salary of accountant = $8,000 per month
Audits that accountant can complete in one month = 10
Per audit payment to accountant = $8,000/10 = $800
Total cost of one audit = $1,000 + $800 = $1,800
So, it will cost an accounting firm $1,800 to produce one audit if it hires either Ted or Jared to do the work.
(b) Market price of one audit = $1,900
Cost of one audit = $1,800
Profit = Market price - Cost = $1,900 - $1,800 = $100
The accounting profit per audit for a firm is $100 that hired either Jared or Ted.
Calculate profit as a percentage -
Profit as a percentage = (Profit/Cost) * 100 = ($100/$1,800) * 100 = 5.56%
The profit rate as a percentage is 5.56 percent.
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