Golden Gate CPA firm leases tax software from Low Tax Software Company to prepare federal and state income tax returns. The lease agreement calls for a base charge of $5,000 per year plus $100 per year for each state for which returns are prepared. Also, Golden Gate is charged $2 ($1 for federal and $1 for state) for each tax return prepared. All Golden Gate's clients have federal and state returns prepared, with 60 percent in Maine and 40 percent in Iowa.

Required:

a. What is the firm's total annual cost for the software if a total 2,500 returns are prepared?

b. What is the firm's cost per unit at a level of 2,500 returns?

c. What is the firm's cost per return if 2,000 are prepared?

d. Besides software lease cost, list five other costs that Golden Gate must consider when the company set the selling price to be charged to the clients.