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ta rate of $52 per hour. Carmen Seville and Don Turco jointly own Bright Green Temp Services (BGTS). Carmen owns 62 percent and Don owns
ta rate of $52 per hour. Carmen Seville and Don Turco jointly own Bright Green Temp Services (BGTS). Carmen owns 62 percent and Don owns 38 percent. The company provides temporary clerical services During the past year, clients used 26,000 hours of temporary services Big City Developers purchased 4,000 hours of temporary services from BGTS last year. Carmen has a 22 percent interest in Big City Developers, and Don has a 62 percent interest in it. At the end of the year, Don suggested that BGTS give Big City Developers a the hourly rate charged next year in recognition of its large purchases and desirability as a client. percent reduction eio that Big City Developers purchases the same number of hours and that all other costs and activities remain the same i the coming year, what effect would the price reduction have on BGTS's operating profits that accrue to Carmen and to Don for the coming year? (Decrease profits should be indicated by minus sign wherever appropriate.) Ms. Seville's Mr. Turco's Total Shares 22%) Shares (38% Decrease in profits at BGTS Increase in profits at Big City Developers Net change in profits
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