Mr. Miles is writing a memo and price the amount per tax return for the following scenario:

Mr. Miles has been hired as the new cost accountant & operations manager for a new tax practice in Los Angeles. They are responsible for several things that relate to a new tax office and ultimately the cost per tax return.

They do not do any tax preparation work, so their salary is not in the product cost.

Their salary is $48,000 per year, plus benefits, and they get $1.00 per tax return as an incentive.

Based on the following information, construct a memo that gives CVP analysis, the variable costs and fixed costs for the firm. Their final goal is to develop a cost per tax return to charge to potential clients. This is a real-world 

application and can have positive and negative issues.

 

Cost Data:

$5.00 per tax return for paper and printing

$5.00 per tax return for software

$40.00 per tax return for direct labor. Mr. McKinzie has agreed to prepare tax returns for $40.00 per hour and can write up tax returns in 1-hour. He is an independent contractor, thus no payroll taxes or benefits.

The partner reviews the tax returns, and spends 10 minutes per return or $10.00 in review. This is QC for the process and not direct labor.

The partner makes $5,000 per month as a draw. There are no taxes paid by the practice, as this is a partnership. His wife works as the receptionist and is paid $3,000 per month, as a draw.

The taxes, benefits and insurance are $3,000 per month for computation purposes.

Firm costs:

Rent- $2,000 per month

Phone/Internet- $500 per month

Copier- $500 per month

Utilities- $500 per month

Supplies- $1,000 per month

Business Insurance- $500 per month

Errors and Omission Insurance $500 per month.

Depreciation on computer and fixtures is $500 per month.

Miscellaneous firm costs are $500 per month.

Mr. Miles expects to create 180 tax returns per month.

Presentations-

Memo format,

1-Firm Name, location, website, and any marketing ideas

2-Vision Statement

3-Core Competencies

4-Variable Costs- list and explain variable costs

5-Fixed Costs- List and explain fixed costs

6-Conclusion and any comments

Give 2- cost savings strategies to help the firm.

7-Price per tax return to charge clients