The desire to maximize profits can work against racial and other types of discrimination. To see why, consider two equally productive accountants named Ted and Jared. Ted is black, and Jared is white. Both can complete 10 audits per month. Instructions: Enter your answers as a whole number. In part b, round your answer for profit rate to 1 decimal place. 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 $7,000 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? $ 1,700 b. If the market price that accounting firms charge their clients for an audit is $1,800, what would the accounting profit per audit be for a firm that hired either Ted or Jared? $ 100 What is the profit rate as a percentage? 5.88 percent c. Suppose that firm A dislikes hiring black accountants, while firm Bis happy to hire them. So Ted ends up working at firm Brather than firm A. If Ted works 11 months per year, how many audits will he complete for firm Beach year? 11,000 How much in accounting profits will firm B earn each year from those audits? $ 110 audits d. Because firm A passed on hiring Ted because he was black, firm A is forgoing the profits it could have earned if it had hired Ted. If the firm is willing to forgo up to $5,000 per year in profit to avoid hiring blacks, by how many dollars will firm A regret its decision not to hire Ted? $5,000
The desire to maximize profits can work against racial and other types of discrimination. To see why, consider two equally productive accountants named Ted and Jared. Ted is black, and Jared is white. Both can complete 10 audits per month. Instructions: Enter your answers as a whole number. In part b, round your answer for profit rate to 1 decimal place. 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 $7,000 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? $ 1,700 b. If the market price that accounting firms charge their clients for an audit is $1,800, what would the accounting profit per audit be for a firm that hired either Ted or Jared? $ 100 What is the profit rate as a percentage? 5.88 percent c. Suppose that firm A dislikes hiring black accountants, while firm Bis happy to hire them. So Ted ends up working at firm Brather than firm A. If Ted works 11 months per year, how many audits will he complete for firm Beach year? 11,000 How much in accounting profits will firm B earn each year from those audits? $ 110 audits d. Because firm A passed on hiring Ted because he was black, firm A is forgoing the profits it could have earned if it had hired Ted. If the firm is willing to forgo up to $5,000 per year in profit to avoid hiring blacks, by how many dollars will firm A regret its decision not to hire Ted? $5,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:The desire to maximize profits can work against racial and other types of discrimination. To see why, consider two equally productive
accountants named Ted and Jared. Ted is black, and Jared is white. Both can complete 10 audits per month.
Instructions: Enter your answers as a whole number. In part b, round your answer for profit rate to 1 decimal place.
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 $7,000 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?
$1,700
b. If the market price that accounting firms charge their clients for an audit is $1,800, what would the accounting profit per audit be for
a firm that hired either Ted or Jared?
$
100
What is the profit rate as a percentage?
5.88 percent
c. Suppose that firm A dislikes hiring black accountants, while firm Bis happy to hire them. So Ted ends up working at firm B rather
than firm A. If Ted works 11 months per year, how many audits will he complete for firm Beach year?
11,000 audits
How much in accounting profits will firm Bearn each year from those audits?
$
110
d. Because firm A passed on hiring Ted because he was black, firm A is forgoing the profits it could have earned if it had hired Ted. If
the firm is willing to forgo up to $5,000 per year in profit to avoid hiring blacks, by how many dollars will firm A regret its decision not
to hire Ted?
$5,000
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