You have been hired as the new cost accountant & operations manager for a new tax practice in Fayetteville, NC. You are responsible for several things that relate to a new tax office and ultimately the cost per tax return.

You do not do any tax preparation work, so your salary is not in the product cost.

Your salary is $48,000 per year, plus benefits, and you get $1.00 per tax return as an incentive.

Based on the following information, construct a memo that gives CVP analysis, the variable costs and fixed costs for the firm. Your final goal is to develop a cost per tax return to charge to potential clients. This is a real-world application and can have positive and negative issues.

Cost Data:

$5.00 per tax return for paper and printing

$5.00 per tax return for software

$40.00 per tax return for direct labor. Mr. McKenzie has agreed to prepare all tax returns for $40.00 per hour and can do all tax returns in 1-hour. He is an independent contractor, thus no payroll taxes or benefits.

The partner reviews the tax returns, and spends 10 minutes per return or $10.00 in review. This is QC for the process and not direct labor.

The partner makes $5,000 per month as a draw. There are no taxes paid by the practice, as this is a partnership. His wife works as the receptionist and is paid $3,000 per month, as a draw.

Your taxes, benefits and insurance are $3,000 per month for computation purposes.

Firm costs:

Rent- $1,500 per month

Phone/Internet- $500 per month

Copier- $500 per month

Utilities- $500 per month

Supplies- $1,000 per month

Business Insurance- $250 per month

Errors and Omission Insurance $250 per month.

Depreciation on computer and fixtures is $500 per month.

Miscellaneous firm costs are $500 per month and are not allocated to tax preparations.

You expect to do 180 tax returns per month.

Presentations-

Memo format,

1- Firm Name, location, website, and any marketing ideas

2- Vision Statement

3- Core Competencies

4- Variable Costs- list and explain variable costs

5- Fixed Costs- List and explain fixed costs

6- Conclusion and any comments

7- Price per tax return to charge clients