Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Clinton Tax Service prepares tax returns for small businesses. The cost of preparing 800 tax returns in the prior year was: Direct labor $ 348,800

Clinton Tax Service prepares tax returns for small businesses. The cost of preparing 800 tax returns in the prior year was:

Direct labor

$

348,800

Variable overhead

313,600

Fixed overhead

244,000

Total cost

$

906,400

At the start of the current year, the company received an offer from Advantage Business, a firm that provides bundled services to businesses. Advantage wants Clinton Tax Service to prepare tax returns for its 140 small-business clients. Clinton Tax Service has the capacity to prepare up to 1,000 returns in a given year, so this special order would not take away revenue from any of Clinton Tax Services current clients. Advantage is willing to pay $910 per tax return.

What will be the effect on Clinton Tax Services profit if it agrees to prepare returns for the 140 clients of Advantage Business? (Enter decrease in profit using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Profit will (increase/decrease) by $( ) per year.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Corporate Finance, European Edition

Authors: Peter Moles, Robert Parrino, David S. Kidwell

1st Edition

0470683708, 9780470683705

More Books

Students also viewed these Accounting questions