In accounting and auditing, the following sampling method is sometimes used to estimate a population total. In estimating the value of an inventory, suppose that a book value exists for each item and is readily accessible. For each item in the sample, the difference D between the book value and the audited value is determined. The net inventory value is estimated by the sum of the book values of the population and N, where N is the population size.

a Show that the estimate is unbiased.

b Find an expression for the variance of the estimate.

c Compare the expression obtained in part (b) to the variance of the usual estimate, which is the product of N and the average audited value. Under what circumstances would the proposed method be more accurate?

d How could a ratio estimate be employed in this situation? Would there be any advantage or disadvantage to using a ratio estimate rather than the proposed method?

"Looking for a Similar Assignment? Get Expert Help at an Amazing Discount!"
Looking for a Similar Assignment? Our Experts can help. Use the coupon code SAVE30 to get your first order at 30% off!

Hi there! Click one of our representatives below and we will get back to you as soon as possible.

Chat with us on WhatsApp