Question
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. |
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