Tom's Tax Services is a small accounting firm that offers tax services to small businesses and individuals. A local store owner has approached Tom about doing his taxes but is concerned about the fees Tom normally charges. The costs and revenues at Tom's Tax Services follow: TOM'S TAX SERVICES Annual Income Statement Sales revenue $ 727.000 Costs Labor 477,000 Equipment lease 49,400 Rent 42.600 Supplies 31,500 Tom's salary 74, 700 Other costs 22,100 Total costs $ 697,300 Operating profit (loss) $ 29,700 If Tom gets the store's business, he will incur an additional $58,900 in labor costs. Tom also estimates that he will have to increase equipment leases by about 10 percent, supplies by 5 percent, and other costs by 5 percent. Required: a. What are the differential costs that would be incurred as a result of adding this new client? b. Tom would normally charge about $73,700 in fees for the services the store would require. How much could he offer to charge and still not lose money on this client? c. What considerations, other than costs, are necessary before making this decision? Complete this question by entering your answers in the tabs below. a. What are the differential costs that would be incurred as a result of adding this new client? b. Tom would normally charge about $73,700 in fees for the services the store would require. How much could he offer to charge and still not lose money on this client? c. What considerations, other than costs, are necessary before making this decision? Complete this question by entering your answers in the tabs below. Required A Required B Required What are the differential costs that would be incurred as a result of adding this new client? Total costs $ 0 Required A Required B > Savo Help Save & Exit Su equipment leases by about 10 percent, supplies by 5 percent, and other costs by 5 percent. Required: a. What are the differential costs that would be incurred as a result of adding this new client? b. Tom would normally charge about $73,700 in fees for the services the store would require. How much could he offer to charge a still not lose money on this client? c. What considerations, other than costs, are necessary before making this decision? Complete this question by entering your answers in the tabs below. Required A Required B Required Tom would normally charge about $73,700 in fees for the services the store would require. How much could he offer to charge and still not lose money on this client? Reduce the fees by a. What are the differential costs that would be incurred as a result of adding this new client? b. Tom would normally charge about $73,700 in fees for the services the store would require. How much could he offer to still not lose money on this client? c. What considerations, other than costs, are necessary before making this decision? Complete this question by entering your answers in the tabs below. Required A Required B Required What considerations, other than costs are necessary before making this decision? (Select all that apply.) Whether this will lead to demands by other clients for lower fees. What other opportunities the company has for its tax professionals Whether the business is likely to expand in the future. Profitability of the other contracts. Current financial position of the company.
