Question

Assume that Whee, Cheatham, and Howe is an auditing firm that has found that its summer interns are subject to a 70 percent learning curve for one of its important tasks, proofreading financial statements. For one of its interns, Kim Down, the firm has started to analyze the relation between time and financial statement proofreading.

Financial Statements Proofread (X)	Time Required to Proofread the Xth Financial Statement
1	6.0000 hours
2	4.2000 hours
4	?
8	?
16	?

Required:

a. Compute the time required to proofread 4, 8, and 16 financial statements. (Round your answers to 4 decimal places.)
TIME REQUIRED FOR THE 4TH FINANCIAL STATEMENT _______________ HRS
TIME REQUIRED FOR THE 8TH FINANCIAL STATEMENT _______________-HRS
TIME REQUIRED FOR THE 16TH FINANCIAL STATEMENT    ______________HRS

b. Assume that Kim's labor time costs $13 per hour. Compare the cost of proofreading the 1st financial statement to the cost of proofreading the 16th financial statement. What is the percentage of the cost of proofreading the 16th financial statement to the cost of proofreading the 1st financial statement? (Do not round your intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (i.e., 32.21))

PERCENTAGE OF PROOFREADING COST FOR THE 16TH FINANCIAL STATEMENT TO COST OF PROOFREADING 1ST FINANCIAL STATEMENT ___________%

Answer 1

Solution:

a.)

Financial Statements Proofread(X)	Time Required to Proofread the Xth Financial Statement
1	6.0000 hours
2	4.2000 hours	2.0000 hours * 0.70
4	2.9400 hours	4.2000 hours *0.70
8	2.0580	2.9400 hours * 0.70
16	1.4406	2.0580 hours * 0.70

b.)
Cost of proofreading the first report = $78 (=6.0 hours * $13 per hour)
Cost of proofreading the 16th report = $18.73 (=1.4406 hours * $13 per hour)
= 24.01% of the first unit cost (=$18.73 / $78)