Can you explain this question and answer thank you so much!

Question 1 (30 marks)

First Accounting LLP is a small accounting firm offering 3 standardised services in the areas of Audit, Tax, and Consultancy using the same staff. The total fixed costs of the firm for the next quarter are projected to be 300,000. Each labour hour costs the firm 100. The firm has also made the following forecasts for the next quarter:

Required:

(a) If the firm were to provide only Consultancy services in the next quarter, how many units of the service would it need to provide in order to break even? Show your workings.

(b) If the firm were to provide only Audit services in the next quarter and aimed to achieve a profit of 650,000 from this, how many units of Audit service should it provide? Show your workings.

(c) Assume the firm will only provide Tax services in the next quarter. How much profit/loss will the firm make if it provides 18 units of tax service? What is the margin of safety in % terms if the firm plans to provide 18 units of tax service? Show your workings.

(d) Assume there is a shortage of qualified accountants in the area. Therefore, the firm can only use its existing employees in the next quarter, which can work up to a maximum of 6,960 hours for that period. The firm estimates that the demand for accounting services in the next quarter will be as follows: 15 units for Audit; 18 units for Tax; 5 units for Consultancy. What quantities of which services should the firm provide in the next quarter in order to maximise its profits? Show your workings.

(e)Assume that the firm can subcontract some of its services to another accounting firm for the next quarter. State, with supporting arguments and assumptions, what is the maximum price per unit of service (for each type of service) AND the maximum total amount that the firm can pay to subcontract the part of the work that it cannot meet internally due to its staff shortage.

	Audit	Tax	Consultancy
Selling Price (per unit)	50000	65000	80000
Variable Labour Cost	25000	32000	40000
Other Variable Cost	15000	8000	10000
Share of Fixed cost	5000	14000	16000