Green,CPA,performed a mean-per-unit sampling plan to examine the inventory balances of ABC Company.Green audited 120 items from a sample and found an audited value of $24,600.The sample had a recorded value of $30,000.If the entire inventory contained 2,400 items and the total recorded value of the inventory was $480,000,the estimated account balance using mean per unit estimation is
A) $393,600.
B) $474,500.
C) $480,000.
D) $492,000.

Question

Quizplus · Accepted Answer

First, we need to calculate the upper deviation rate (UDR):
UDR = (Audited value - Recorded value)/Recorded value
UDR = ($24,600 - $30,000)/$30,000
UDR = -0.1467 or -14.67%

Since the UDR is negative, we need to add it to the recorded value to estimate the account balance:
Estimated account balance = Recorded value + (UDR x Total recorded value/Total sample size x Total population size)
Estimated account balance = $480,000 + (-0.1467 x $480,000/120 x 2,400)
Estimated account balance = $492,000

Therefore, the estimated account balance using mean per unit estimation is $492,000.

Green,CPA,performed a Mean-Per-Unit Sampling Plan to Examine the Inventory Balances