Wiley CIA 2006 v1

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Question: V2C1-0001
An operational audit is being performed to evaluate the productivity of telephone sales representatives relative to last year. The organization sells two similar products, one of which is priced 20% higher than the other. Prices did not change during the two years subject to the audit, and the gross profit percentage is the same for both products. The sales representatives are paid a base salary plus a commission. Which one of the following items represents the best evidence that the organizations sales representatives are more productive this year than last year?

Answers
A: The revenue per representative is higher this year than last year. B: The number of sales calls is higher this year than last year. C: The ratio of the number of new customers to the number of prospects contacted is higher this year than last year. D: Unit sales increased at a higher rate this year than last year.

Answer Explanations
Answer (a) is correct. Revenue per representative measures productivity because it relates an output to input. It is better than the other responses as explained below. Answer (b) is incorrect. Answer (a) is better than answer (b) because number of sales calls does not measure output. Answer (c) is incorrect. Answer (a) is better than answer (c) because the higher ratio could be achieved even if unit sales, revenue, and gross profit declined and the number of sales representatives increased. Answer (d) is incorrect. Answer (a) is better than answer (d) because the unit sales increase could be achieved by an uneconomic addition of sales representatives and would not necessarily result in higher revenue.

Wiley CIA Examination Review, 1.0, John Wiley & Sons, Inc. 2006

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2/17/2012