FUND.OF COST ACCT >CUSTOM<
6th Edition
ISBN: 9781307515565
Author: LANEN
Publisher: MCG/CREATE
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Textbook Question
Chapter 1, Problem 45P
Cost Data for Managerial Purposes
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.
If Tom gets the store’s business, he will incur an additional $60,000 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 15 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 $75,000 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?
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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 724,000
Costs
Labor 457,000
Equipment Lease 48,000
Rent 42,500
Supplies 31,300
Tom’s Salary 73,800
Other Costs 21,400
Total Costs 674,900
Operating Profit (Loss) 49,100
If Tom gets the store’s business, he will incur an additional $59,200 in labor costs. Tom also estimates that he will have to increase equipment leases by about 5 percent, supplies by 5 percent, and other costs by 15 percent.
Required:
What are the differential costs that would be incurred as…
Hannah Ortega is considering expanding her business. She plans to hire a salesperson to cover trade shows. Because of
compensation, travel expenses, and booth rental, fixed costs for a trade show are expected to be $10,780. The booth will be
open 22 hours during the trade show. Ms. Ortega also plans to add a new product line, ProOffice, which will cost $180 per
package. She will continue to sell the existing product, EZRecords, which costs $94 per package. Ms. Ortega believes that
the salesperson will spend approximately 12 hours selling EZRecords and 10 hours marketing ProOffice.
Required
a. Determine the estimated total cost and cost per unit of each product, assuming that the salesperson is able to sell 78
units of EZRecords and 59 units of ProOffice.
b. Determine the estimated total cost and cost per unit of each product, assuming that the salesperson is able to sell 205
units of EZRecords and 110 units of ProOffice.
Note: For all requirements, round "Cost per unit" to 2 decimal…
Chapter 1 Solutions
FUND.OF COST ACCT >CUSTOM<
Ch. 1 - Explain why it is important to consider the...Ch. 1 - Explain the differences between financial...Ch. 1 - Place the letter of the appropriate accounting...Ch. 1 - Distinguish among the value chain, the supply...Ch. 1 - Who are the customers of cost accounting?Ch. 1 - How can cost accounting information together with...Ch. 1 - Prob. 7RQCh. 1 - Does the passage of Sarbanes-Oxley mean that codes...Ch. 1 - Prob. 9CADQCh. 1 - Prob. 10CADQ
Ch. 1 - Prob. 11CADQCh. 1 - Its not the job of accounting to determine...Ch. 1 - Prob. 13CADQCh. 1 - How would cost accounting information help...Ch. 1 - Airlines are well known for using complex pricing...Ch. 1 - Hostess Brands makes a variety of baked goods just...Ch. 1 - What potential conflicts might arise between...Ch. 1 - Refer to the Business Application discussion of...Ch. 1 - Prob. 19CADQCh. 1 - Why does a cost accountant need to be familiar...Ch. 1 - Will studying cost accounting increase the chances...Ch. 1 - Prob. 22CADQCh. 1 - Value Chain and Classification of Costs Apple...Ch. 1 - Pfizer Inc., a pharmaceutical firm, incurs many...Ch. 1 - Tesla, Inc., incurs many types of costs in its...Ch. 1 - Prob. 26ECh. 1 - Accounting Systems McDonalds is a major company in...Ch. 1 - Accounting Systems Ford Motor Company manufactures...Ch. 1 - Cost Data for Managerial Purposes As an analyst at...Ch. 1 - Prob. 30ECh. 1 - Prob. 31ECh. 1 - Refer to the information in Exercise 1-31. The...Ch. 1 - Refer to Exhibit 1.5, which shows budgeted versus...Ch. 1 - Trends in Cost Accounting Required For each cost...Ch. 1 - Prob. 35ECh. 1 - Prob. 36ECh. 1 - Refer to the information in Exercise 1-32. Jon...Ch. 1 - Prob. 38PCh. 1 - Cost Data for Managerial Purposes Imperial Devices...Ch. 1 - Cost Data for Managerial Purposes You have been...Ch. 1 - Prob. 41PCh. 1 - Cost Data for Managerial Purposes Campus Package...Ch. 1 - Cost Data for Managerial Purposes KC Services...Ch. 1 - Cost Data for Managerial Purposes B-You is a...Ch. 1 - Cost Data for Managerial Purposes Toms Tax...Ch. 1 - Gilman’s Café is a popular restaurant in a local...Ch. 1 - Prob. 47PCh. 1 - Prob. 48PCh. 1 - Refer to Exhibit 1.5, which shows budgeted versus...Ch. 1 - Cost Data for Managerial PurposesFinding Unknowns...Ch. 1 - Prob. 51PCh. 1 - Prob. 52PCh. 1 - Prob. 53ICCh. 1 - Miller Cereals is a small milling company that...Ch. 1 - Before Miller Cereals can introduce the new...Ch. 1 - The following story is true except that all names...
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