In Preparing for an Audit of the Retail Footwear Division

question 78

Multiple Choice

In preparing for an audit of the retail footwear division of a major retail organization,the auditor gathered the following information about the organization's stores: $$\begin{array} { l r r r r } & \text { All } & \text { Northeast } & \text { Southwest } & \text { Mid-Central } \\& \text { Stores } & \text { Region } & \text { Region } & \text { Region } \\& \$ 736,000 & \$ 840,000 & \$ 760,000 & \$ 630,000 \\\text { Average sales per store } & \$ 375,000 & \$ 420,000 & \$ 325,000 & \$ 395,000 \\\text { Average cost of goods sold per store } & 48 & 13 & 18 & 17 \\\text { Number of stores } & 1,800 & 2,200 & 1,850 & 1,550 \\\text { Average square feet per store } & \$ 137,000 & \$ 152,000 & \$ 140,000 & \$ 122,000 \\\text { Average sales per full-time employee } & \$ 98,000 & \$ 102,000 & \$ 82,000 & \$ 112,000 \\\text { Average wage related expense per store } & \$ 35,000 & \$ 285,000 & \$ 320,000 & \$ 115,000\end{array}$$ An auditor performs analytical procedures that involve comparing the gross margins of various divisional operations with those of other divisions and with the individual division's performance in previous years.The auditor notes a significant increase in the gross margin at one division.The auditor does some preliminary investigation and also notes that there were no changes in products,production methods,or divisional management during the year.Based on the above information,the most likely cause of the increase in gross margin would be:

• A)An increase in the number of competitors selling similar products.
• B)A decrease in the number of suppliers of the material used in manufacturing the product.
• C)An overstatement of year-end inventory.
• D)An understatement of year-end accounts receivable.

Evaluate the effects of wage changes on labor-leisure choices and the backward-bending labor supply.

Understand the role of endowments and budget constraints in consumer choices.

Analyze the concept of inferior goods and its implications on demand and labor supply.

Understand how changes in wages and nonlabor income affect labor supply when leisure is considered a normal good.

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Definitions:

Economic Models

Theoretical constructs that represent economic processes by a set of variables and a set of logical and/or quantitative relationships between them.

Policies

Guidelines or principles adopted by an organization, government, or individual to guide decision-making and achieve desired outcomes.

Positive Economics

The branch of economic analysis that describes the way the economy actually works.

Production Possibility Frontier

A visual map outlying the highest possible production levels for two goods, considering a defined compilation of resources and other relevant factors.