Special Order Decision

Wong Accounting Services is considering a special order that it received from one of its corporate clients. The special order calls for Wong to prepare the individual tax returns of the corporation's four largest shareholders. The company has idle capacity that could be used to complete the special order. The following data have been gathered about the preparation of individual tax returns:

Materials cost per page	$1
Average hourly labor rate	$58
Standard hours per return	4
Standard pages per return	10
Variable overhead cost per page	$0.60
Fixed overhead cost per page	$0.60

Wong Accounting Services would be satisfied with a $45 gross profit per return. Compute the minimum bid price for the entire order. _____$

Cyber Queen Services' manager must decide whether to hire a new employee or to outsource some of the web design work to Kai Yu, a freelance graphic designer. If she hires a new employee, she will pay $30 per design hour for the employee to work 500 hours and incur service overhead costs of $2 per design hour. If she outsources the work to Kai Yu, she will pay $34 per design hour for 500 hours of work. She will also redirect the use of a computer and server to generate $4,000 in additional revenue from web page maintenance work.

How much would be saved? $____per year

One component of a radio produced by Audio Systems, Inc., is currently being purchased for $225 per 100 parts. Management is studying the possibility of manufacturing that component. Annual production (usage) at Audio is 70,000 units; fixed costs (all of which remain unchanged whether the part is made or purchased) are $38,500; and variable costs are $0.95 per unit for direct materials, $0.55 per unit for direct labor, and $0.60 per unit for variable overhead.

How much would be saved? $_____per year