Question

Tom's Tax Services is a small accounting firm that offers tax services to small businesses and individuals. A local store owner has approached Tom about doing his taxes but is concerned about the fees Tom normally charges. The costs and revenues at Tom's Tax Services follow: TOM'S TAX SERVICES Annual Income Statement Sales revenue $ 727.000 Costs Labor 477,000 Equipment lease 49,400 Rent 42.600 Supplies 31,500 Tom's salary 74, 700 Other costs 22,100 Total costs $ 697,300 Operating profit (loss) $ 29,700 If Tom gets the store's business, he will incur an additional $58,900 in labor costs. Tom also estimates that he will have to increase equipment leases by about 10 percent, supplies by 5 percent, and other costs by 5 percent. Required: a. What are the differential costs that would be incurred as a result of adding this new client? b. Tom would normally charge about $73,700 in fees for the services the store would require. How much could he offer to charge and still not lose money on this client? c. What considerations, other than costs, are necessary before making this decision? Complete this question by entering your answers in the tabs below.

Answer 1

Required a) particulan Additional cost Labor cost 58900 Equipment (49400 X 40:12) $11940 Supplies (31500X 5.)) $1575 Other cast (22100 x 5.1) $1105 $ 66520 Total differential cost Required by $73700 However Here normal fees amounts to Addikool Expenses would be $ 66520. Any Amount of fees over $66520 will lead to Net income increase. So, he can reduce the fees by down to $66520 and Still not loose the money So, he can reduce the tees by a 873 700 - $66520 - $7180 Reduce the fees by $ 480

Required c) Here All options are correct Except the last osade Current financial position of the company