Question
Springfield Tax Service prepares tax returns for small businesses. The cost of preparing 800 tax returns in the prior year was: Direct labor $339,200 Variable
Springfield Tax Service prepares tax returns for small businesses. The cost of preparing 800 tax returns in the prior year was:
Direct labor $339,200
Variable overhead 303,200
Fixed overhead 244,000
Total cost $886,400
At the start of the current year, the company received an offer from Advantage Business, a firm that provides bundled services to businesses. Advantage wants Springfield Tax Service to prepare tax returns for its 140 small-business clients. Springfield Tax Service has the capacity to prepare up to 1,000 returns in a given year, so this special order would not take away revenue from any of Springfield Tax Service's current clients. Advantage is willing to pay $940 per tax return.
What will be the effect on Springfield Tax Service's profit if it agrees to prepare returns for the 140 clients of Advantage Business?(Enter decrease in profit using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Profit will (DECREASE OR INCREASE CHOOSE ONE) by $___________(FILL IN BLANK) per year.
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