The following questions concern analytical procedures in the acquisition and payment cycle. Choose the best response.

a. Which of the following comparisons would be most use¬ ful to an auditor in evaluating the results of an entity's operations?

(1) Current year revenue to budgeted current year revenue

(2) Current year warranty expense to current year contingent liabilities

(3) Prior year accounts payable to current year accounts payable

(4) Prior year payroll expense to budgeted current year payroll expense

b. The controller of Eigram Manufacturing, Inc. wants to use ratio analysis to identify the possible existence of idle equipment or the possibility that equipment has been dis¬ posed of without having been written off. Which of the following ratios would best accomplish this objective?

(1) Amortization expense/book value of manufacturing equipment

(2) Repairs and maintenance cost/direct labour costs

(3) Gross manufacturing equipment cost/units produced

(4) Accumulated amortization/book value of manufacturing equipment