Forensic Accounting
University of Florida
1. Consider a firm of forensic accountants who employ L accountants in their business.
Assume that this number is measured in units of 50 accountants. The quantity of
investigations that they are able to perform on behalf of clients is given by the equation:
Q (L) = 60L – 0.04L2
Using this expression, answer the following questions:
a) Why is there no term on L^0 in this expression? [2 Marks]
Answer:
The term L0 is not in the equation since any number raised to zero is one. This
means that the term with L^0 does not affect the value of the investigation quantity
even if L is varied.
b) Write a function for the marginal product of labour (MPL) for this audit firm [2
Marks]
Answer:
MPL = (Qn – Qn-1) / (Ln – Ln-1)
Where: Qn = quantity of investigation at time n
Qn-1 = quantity of investigation at time n-1
Ln = units of accountants at time n
Ln-1 = units of accountants at time n-1
c) What is the optimum number of forensic accountants to employ in order to
maximize the number of investigations that the firm can complete? (Assume that
, there is no shortage of clients willing to use the firm to carry out investigations.) [2
Marks]
Answer:
Labour Production (investigation) MPL
(Accountants)
0 0 -
50 2900 54
100 5600 108
150 8100 50
200 10400 46
Q (L) = 60L – 0.04L2
MPL = (Qn – Qn-1) / (Ln – Ln-1)
Therefore the optimum number of accountants is 100
d) Sketch a graph of the production function for the firm. Label all intercepts and any
maxima or minima on your plot clearly. [3 Marks]
Answer:
Q (L) = 60L – 0.04L2
University of Florida
1. Consider a firm of forensic accountants who employ L accountants in their business.
Assume that this number is measured in units of 50 accountants. The quantity of
investigations that they are able to perform on behalf of clients is given by the equation:
Q (L) = 60L – 0.04L2
Using this expression, answer the following questions:
a) Why is there no term on L^0 in this expression? [2 Marks]
Answer:
The term L0 is not in the equation since any number raised to zero is one. This
means that the term with L^0 does not affect the value of the investigation quantity
even if L is varied.
b) Write a function for the marginal product of labour (MPL) for this audit firm [2
Marks]
Answer:
MPL = (Qn – Qn-1) / (Ln – Ln-1)
Where: Qn = quantity of investigation at time n
Qn-1 = quantity of investigation at time n-1
Ln = units of accountants at time n
Ln-1 = units of accountants at time n-1
c) What is the optimum number of forensic accountants to employ in order to
maximize the number of investigations that the firm can complete? (Assume that
, there is no shortage of clients willing to use the firm to carry out investigations.) [2
Marks]
Answer:
Labour Production (investigation) MPL
(Accountants)
0 0 -
50 2900 54
100 5600 108
150 8100 50
200 10400 46
Q (L) = 60L – 0.04L2
MPL = (Qn – Qn-1) / (Ln – Ln-1)
Therefore the optimum number of accountants is 100
d) Sketch a graph of the production function for the firm. Label all intercepts and any
maxima or minima on your plot clearly. [3 Marks]
Answer:
Q (L) = 60L – 0.04L2
