Due to Data Errors Occurring from Time to Time in Processing

question 19

Multiple Choice

Due to data errors occurring from time to time in processing the Albert Company's payroll, the company's management is considering the addition of a data validation control procedure that is projected to reduce the risk of these data errors from 13% to 2%.The cost of the payroll reprocessing is estimated to be $11,000.If the data validation control procedure is implemented, the cost of this procedure is expected to be $700 per pay period (employees are paid biweekly) .Based on the above data, which of the following statements is true?

• A)The data validation control procedure should be implemented because its net estimated benefit is $1,210
• B)The data validation control procedure should be implemented because its net estimated benefit is $510
• C)The data validation control procedure should not be implemented because the $700 expected cost per pay period exceeds the procedure's expected benefit
• D)The data validation control procedure should not be implemented because its net estimated benefit is a negative $1,210, thereby causing the control procedure to fail in terms of being cost effective

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Definitions:

Yankee Bond

A bond issued by a foreign entity in the United States, denominated in U.S. dollars.