Mead & Lawson LLP, is a local CPA firm that prepares approximately 1,000 tax returns each year for it's chase. The managing partner of the firm has asked for information concerning the cost of preparing tax returns.

He has been provided with the following data:

• Average wage per hour of tax preparation staff - $ 35
• Average wage per hour of classical staff - $ 12
• Average number of hours per return (preparation) - 10
• Average number of hours per return (clerical) - 2

Requirements:

a)What is Mead & Lawson's average direct labor?

b)Think creatively about options that might be used to reduce the cost of preparing tax returns, what are the implications of the options you used?

c)Mead & Lawson's has an opportunity to purchase tax preparation software for $5,000 per year. If the software is used, the hours needed to prepare the return would decrease to 3hrs per return and the clerical time would increase to 4hrs because of additional computer operator time. How would the purchase affect the cost of labor on a per-tax return basis?

d)Does it appear to be a good business decision to purchase the software? What other cost must be considered?

e)What are the qualitative aspects of the preceding decision?