Hannah Is a Managing Partner of Andrusian Worldwide LLP,an Accounting

question 62

Essay

Hannah is a managing partner of Andrusian Worldwide LLP,an accounting and consulting partnership.Acting within her implied authority,Hannah makes a contract for Andrusian to perform an audit for National Motors Company.The audit fee is $325,000.The performance of the audit takes more hours than Hannah expected,because Hannah has failed to determine the number of locations in which National Motors does business prior to setting the audit fee.As a result,Andrusian loses $50,000 on the audit.Has Hannah breached a fiduciary duty?

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Definitions:

Labour Rate Variance

The difference between the actual cost of labor and the expected (or standard) cost, based on the standard rate per hour.

Standard Cost Per Mip

Standard cost per MIP refers to the benchmark or predetermined cost assigned to manufacturing one unit of measurement or milepost in production, used for budgeting and performance evaluation.

Direct Labour

Compensation for employees who are directly involved in manufacturing products or providing services.

Direct Materials

Raw materials that can be directly traced to the production of a specific product.