PART A You have recently completed your degree at Monash University, and joined your uncle's firm, which specialises in the preparation of tax returns. The firm offers two basic services: () the preparation of income tax returns for wage and salary earners and (ii) for small businesses. You are only responsible for tax returns for small businesses. The firm is using a software package to process data. You are concerned about the pricing policy, which sets a flat fee of $60 per return with your uncle's permission, you have decided to use activity- based costing to estimate the cost of preparing the tax returns. You have compiled the following information regarding the firm's total costs and activities for the completion of wage and salary earners' tax returns. Activity Activity Activity driver Quantity of cost $ activity driver Interview client 25 000 No. of clients 5 000 Obtain missing data 280 000 No. of follow-up calls 10 000 Input data 30 000 No. of data entries 300 000 Print return 40 000 No. of returns 5 000 Submit return 15 000 No. of returns 5 000 Verify assessment 30 000 No. of hours 2 500 assessment 5 000 No. of hours 2 500 Discuss with client Total cost 425 000 Additional information: A client for small business, Alpha Sdn. Bhd. is interviewed only once per return. The activities performed for Alpha Sdn. Bhd. is as follows:- Each return requires 2 follow-up calls to obtain missing data. Each return requires 30 data entries. It takes approximately 20 minutes to verify an assessment. It takes approximately 30 minutes to discuss an assessment with the client. Required: (a) Use the activity-based costing to estimate the cost of preparing a tax return for Alpha Sdn. Bhd. (6) Refer to your answer in (a) above, evaluate the firm's pricing policy. Discuss the problems that are likely to arise in using activity-based costing in service firms