The recorded inventory balance for Faulk Company was $ 1,000,000 and comprised 2,500 customer accounts.

Required:

For each of the following independent sets of conditions, determine the appropriate sample size for the audit of Faulk’s inventory using classical variables sampling (mean- per- unit estimation). Based on the differences in your calculations, identify the general relationship between different factors and sample size. (RIA 5 risk of incorrect acceptance, RIR 5 risk of incorrect rejection, TM 5 tolerable misstatement, EM 5 expected misstatement, SD 5 standard deviation.)

a. RIA 5 5 percent, RIR 5 5 percent, TM 5 $ 50,000, EM 5 $ 20,000, SD 5 $ 40.

b. RIA 5 10 percent, RIR 5 5 percent, TM 5 $ 50,000, EM 5 $ 20,000, SD 5 $ 40.

c. RIA 5 10 percent, RIR 5 10 percent, TM 5 $ 50,000, EM 5 $ 20,000, SD 5 $ 40.

d. RIA 5 5 percent, RIR 5 5 percent, TM 5 $ 30,000, EM 5 $ 20,000, SD 5 $ 40.

e. RIA 5 5 percent, RIR 5 5 percent, TM 5 $ 50,000, EM 5 $ 10,000, SD 5 $ 40.

f. RIA 5 5 percent, RIR 5 5 percent, TM 5 $ 50,000, EM 5 $ 10,000, SD 5 $ 30.