Toms Tax Services is a small accounting firm that offers tax services to small businesses and individuals.
Question:
If Tom loses the cafés 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 cafés 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 thisdecision?
Transcribed Image Text:
TOM'S TAX SERVICES Annual Income Statement 4 Salee revenue 5 Costs 6 Labor 7 Equipment lease 8 Rent 9 Supplies 10 Tom's salary 477,000 50,400 43,200 32,400 75,000 11 Other costa 12 Total costs 13 Operating profit (loaa) S 700,800 S 19,200 14
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a The following differential costs would be incurred b Since the loss of th...View the full answer
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Related Book For
Fundamentals of Cost Accounting
ISBN: 978-0077398194
3rd Edition
Authors: William Lanen, Shannon Anderson, Michael Maher
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