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 5.0000 hours 2 3.5000 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.)

b. Assume that Kim's labor time costs $6 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))

Answer 1

a)

Financial Statements Proofread (X)	Time Required toProofread the Xth Financial Statement	Calculation
1	5.0000
2	3.5000	(5*70%)
4	2.4500	(3.5*70%)
8	1.7150	(2.45*70%)
16	1.2005	(1.715*70%)

b)Cost of proofreading the 1st report = $30 ( 5 hours × $6 )

Cost of proofreading the 16th report = $7.2030 (1.2005 × $6)

= 24.01% of the 1st unit cost (= $7.2030 ÷ $30)