(Allocation of scarce resources) Latoya Jones received her accounting degree in 1976. Since graduating, she has obtained significant experience in a vari¬ ety of job settings. Her skills include auditing, income and estate taxation, and business consulting. Jones currently has her own practice, and her skills are in such demand that she limits her practice to taxation issues. Most of her engagements are one of three types: individual income taxation, estate taxation, or corporate taxation. Following are data pertaining to the revenues and costs of each tax area (per tax return):

Fixed costs of operating the office are $50,000 per year. Jones has such sig¬ nificant demand for her work that she must ration her time. She desires to work no more than 2,500 hours in the coming year. She can allocate her time so that she works only on one type of tax return or on any combina¬ tion of the three types.

a. How should Jones allocate her time in the coming year to maximize her income?

b. Based on the optimal allocation, what is Jones’ projected pre-tax income for the coming year?
C. What other factors should Jones consider in allocating her time?

d. What could Jones do to overcome the scarce resource constraint?LO.1  

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Revenue Variable costs Hours per return of Jones' time Individual Estate Corporate $350 $1,200 $750 $50 $200 $150 2 8 5