B-You is a consulting firm that works with managers to improve their interpersonal skills. Recently, a representative of a high-tech research firm approached B-You’s owner with an offer to contract for one year with B-You to improve the interpersonal skills of a newly hired manager. B-You reported the following costs and revenues during the past year.

B-YOU

Annual Income Statement

Sales revenue .............$504,000

Costs

Labor ................ 239,400

Equipment lease ........... 35,280

Rent ............... 30,240

Supplies ............... 22,680

Officers’ salaries ........... 147,000

Other costs .............. 15,960

Total costs .............$490,560

Operating profit (loss) .........$ 13,440

If B-You decides to take the contract to help the manager, it will hire a full-time consultant at $85,000. Equipment lease will increase by 5 percent. Supplies will increase by an estimated 10 percent and other costs by 15 percent. The existing building has space for the new consultant. No new offices will be necessary for this work.

Required

a. What are the differential costs that would be incurred as a result of taking the contract?

b. If the contract will pay $90,000, should B-You accept it?

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