Maurice Tutor

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About Maurice Tutor

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Teaching Since: May 2017
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Education

  • MCS,PHD
    Argosy University/ Phoniex University/
    Nov-2005 - Oct-2011

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  • Professor
    Phoniex University
    Oct-2001 - Nov-2016

Category > Accounting Posted 06 Aug 2017 My Price 7.00

Tom’s Tax Services

Cost Data for Managerial Purposes

Tom’s Tax Services is a small accounting firm that offers tax services to small businesses and individuals. One of Tom’s major clients, the Orange Café, is considering moving its business to another tax service closer to its location that has promised lower fees. Currently, the costs and revenues at Tom’s Tax Services are as follows:

1

TOM’S TAX SERVICES A

B

C

2

Annual Income Statement

 

 

3

 

 

 

4

Sales revenue

$720,000

 

5

Costs

 

 

6

Labor

477,000

 

7

Equipment lease

50,400

 

8

Rent

43,200

 

9

Supplies

32,400

 

10

Tom’s salary

75,000

 

11

Other costs

22,800

 

12

Total costs

$700,800

 

13

Operating profit (loss)

$19,200

 

14

 

 

 

If Tom loses the café’s business, he can save $60,000 in labor costs. Tom also estimates that he can reduce equipment leases by about 10 percent, supplies by 5 percent, and other costs by 15 percent.

Required

a. What are the differential costs that would be saved as a result of losing the café’s business?

b. Tom currently collects about $75,000 in fees from the café. How much could he offer to reduce the fees and still not lose money on this client?

c. What considerations, other than costs, are necessary before making this decision?

Answers

Maurice Tutor
(5)
Status NEW Posted 06 Aug 2017 08:08 PM My Price 7.00

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