Check m TOM'S TAX SERVICES Annual Income Statement Sales revenue $ 721,000 Costs Labor 471,000 Equipment lease 48,800 Rent 42,100 Supplies 31,300 Tom's salary 74,900 Other costs 20,800 Total costs $ 688,900 Operating profit (loss) $ 32, 100 5 If Tom gets the store's business, he will incur an additional $60,000 in labor costs. Tom also estimates that he will have to increase equipment leases by about 5 percent, supplies by 10 percent, and other costs by 5 percent. Required: a. What are the differential costs that would be incurred as a result of adding this new client? b. Tom would normally charge about $73,800 in fees for the services the store would require. How much could he offer to charge and still not lose money on this client? c. What considerations, other than costs, are necessary before making this decision? What are the differential costs that would be incurred as a result of adding this new client? Total costs $ 0 Required A Required B > Required A Required B Required C Tom would normally charge about $73,800 in fees for the services the store would require. How much could he offer to charge and still not lose money on this client? Reduce the fees by What considerations, other than costs, are necessary before making this decision? (Select all Whether this will lead to demands by other clients for lower fees. What other opportunities the company has for its tax professionals. Whether the business is likely to expand in the future. Profitability of the other contracts. Current financial position of the company.