Question

You are auditing payroll for the Harbor Creek Technologies company for the year ended October​ 31, 2016. Included next are amounts from the​ client's trial​ balance, along with comparative audited information for the prior year. LOADING...​(Click the icon to view the amounts from the trial​ balance.) LOADING...​(Click the icon to view the additional​ information.) Requirements a. Use the final balances for the prior year and the information in items 1 through 5 to develop an expected value for each​ account, except sales.​ (Round to the nearest whole​ dollar.) b. Calculate the difference between your expectation and the​ client's recorded amount as a percentage using the formula​ (expected value-recorded​ amount)/expected value. ​(Round to the nearest hundredth​ percent, X.XX%.) ​(Note 1: When computing the expected value of factory hourly​ payroll, you must take into consideration both the 7​% wage increase and the 11​% increase in the number of units produced and sold. Note​ 2: Use the increase in the ​10/31/2016 preliminary sales balance over the ​10/31/2015 audited sales balance to determine the expected value for sales commissions on ​10/31/2016​.) Requirement a. (A) (B) Preliminary Balance Expected Value 10/31/2016 10/31/2016 Executive salaries 630,599 Factory hourly payroll (see Note 1) 11,697,055 Factory supervisors' salaries 770,600 Office salaries 2,905,881 Sales commissions (see Note 2) 2,660,499 Enter any number in the edit fields and then click Check Answer

Audited Balance

Preliminary Balance

10/31/2015

10/31/2016

Sales*

$50,064,758

$56,573,177

Executive salaries

501,948

630,599

Factory hourly payroll

10,210,396

11,697,055

Factory supervisors' salaries

770,600

770,600

Office salaries

2,239,582

2,905,881

Sales commissions

2,018,149

2,660,499

*Sales have increased 13% over prior year. 2% percent of that is due to an increase in the average selling price. The remaining 11% is attributed to an increase in the number of units sold.

You have obtained the following information to help you perform preliminary analytical procedures for the payroll account balances.

1.	There has been a significant increase in the demand for Harbor CreekHarbor Creek​'s products. The increase in sales was due to both an increase in the average selling price of twotwo percent and an increase in units sold that resulted from the increased demand and an increased marketing effort.
2.	Even though sales volume increased there was no addition of​ executives, factory​supervisors, or office personnel.
3.	All employees including​ executives, but excluding commission​ salespeople, received a sevenseven percent salary increase starting November​ 1, 20152015. Commission salespeople receive their increased compensation through the increase in sales.
4.	The increased number of factory hourly employees was accomplished by recalling employees that had been laid off. They receive the same wage rate as existing employees. Harbor CreekHarbor Creek does not permit overtime.
5.	Commission salespeople receive a threethree percent commission on all sales on which a commission is given. Approximately 6565 percent of sales earn sales commission. The other 3535 percent are​ "call-ins," for which no commission is given. Commissions are paid in the month following the month they are earned.

Answer 1

Sales of 2015	50,064,758
Add: increase @ 2% on above value due to increase in selling price	1001295.16
Sales of 2015 at revised price	51,066,053
Sales of 2016	56,573,177
Less: sales of 2015 at revised price	51,066,053
Increase in sales due to volume	5,507,124
Increase in sales due to volume	5,507,124
Divided by: sales of 2015 at revised price	51,066,053
Increase percentage of sales due to volume	10.784314626%

Expected cost

	Cost of 2015	Increase in salary @ 7%	Salary of 2016
Executive salaries	501,948	35,136	537,084
Factory hourly payroll *	10,210,396	714,728	10,925,124
Factory supervisors' salaries	770,600	53,942	824,542
Office salaries	2,239,582	156,771	2,396,353
* Factory hourly payroll (10925124+(10925124*10.784314626%))			12,103,324
Sales on Which Sales commissions (56573177*65.65%)			37140291
Multiply by : sales commissions percentage			3.00%
Sales commissions			1,114,209

Analysis of payroll
	Preliminary Balance	Expected balance	Preliminary Balance - Expected balance, Increase (decrease)	Difference on percentage of Preliminary Balance
Executive salaries	630,599	537,084	93,515	14.83%
Factory hourly payroll	11,697,055	12,103,324	(406,269)	-3.47%
Factory supervisors' salaries	770,600	824,542	(53,942)	-7.00%
Office salaries	2,905,881	2,396,353	509,528	17.53%
Sales commissions	2,660,499	1,114,209	1,546,290	58.12%