Using ratio estimation, an auditor has taken a sample of 200 from a population's 40,000 items; that population has a book value of $200,000. She found that in her sample the average audited value was $4.20, while the average book value was $5.20. What is the estimated total audited value of the population?
A) $160,000.
B) $161,538.
C) $168,000.
D) $200,000.

Question

Quizplus · Accepted Answer

First, we need to calculate the ratio of audited value to book value in the sample:

Average audited value/average book value = $4.20/$5.20 = 0.8077

Next, we can use this ratio to estimate the total audited value of the population:

Estimated total audited value = (total book value) x (ratio of audited value to book value)

Estimated total audited value = $200,000 x 0.8077 = $161,540

Therefore, the best choice is B, $161,538.

Using Ratio Estimation, an Auditor Has Taken a Sample of 200