The desire to maximize profits can work against racial and other types of discrimination. To see why, consider two equally productive accountants named Ted and Jared. Ted is African American, and Jared is white. Both can complete 10 audits per month.

List as whole numbers and in part b, round solution for profit rate to 1 decimal place.

1. Suppose that for any accounting firm that hires either Ted or Jared, all the other costs of performing an audit (besides paying either Ted or Jared) come to $1,100 per audit. If the going rate that must be paid to hire an accountant is $9,000 per month, how much will it cost an accounting firm to produce one audit if it hires either Ted or Jared to do the work? Solution: $____

2. If the market price that accounting firms charge their clients for an audit is $2,200, what would the accounting profit per audit be for a firm that hired either Ted or Jared? Solution: $ _____

What is the profit rate as a percentage? Solution: ____percent

3. Suppose that firm A dislikes hiring African American accountants, while firm B is happy to hire them. So Ted ends up working at firm B rather than firm A. If Ted works 11 months per year, how many audits will he complete for firm B each year? Solution: 110 audits

How much in accounting profits will firm B earn each year from those audits? Solution: $ ___

4. Because firm A passed on hiring Ted because he is African American, firm A is forgoing the profits it could have earned if it had hired Ted. If the firm is willing to forgo up to $12,000 per year in profit to avoid hiring African American people, by how many dollars will firm A regret its decision not to hire Ted? Solution: $____

Answer rating: 100% (QA)

1 The cost of producing one audit The total cost of producing one audit is the sum of the cost of pa... View the full answer