E8-6A Special Order Roy & Roy, CPAs currently provides tax return preparation services to individuals in the local community. Roy has received a one-time only request to prepare 100 tax returns for clients of another CPA firm in the community while the owner recovers from major surgery. Roy has the capacity to prepare 700 returns. Roy has an effective income tax rate of 40%. Roy's income statement, before consideration of the one-time only request, is as follows: Sales (500 returns at $300 per return) $ 150,000 Variable preparation costs 20,000 Contribution margin 130,000 Fixed preparation costs 80,000 Operating income 50,000 Income taxes 20,000 Net income $ 30,000 In negotiating a price for the special request, at what amount should Roy & Roy set the minimum per-return price?
E8-6A Special Order Roy & Roy, CPAs currently provides tax return preparation services to individuals in the local community. Roy has received a one-time only request to prepare 100 tax returns for clients of another CPA firm in the community while the owner recovers from major surgery. Roy has the capacity to prepare 700 returns. Roy has an effective income tax rate of 40%. Roy's income statement, before consideration of the one-time only request, is as follows: Sales (500 returns at $300 per return) $ 150,000 Variable preparation costs 20,000 Contribution margin 130,000 Fixed preparation costs 80,000 Operating income 50,000 Income taxes 20,000 Net income $ 30,000 In negotiating a price for the special request, at what amount should Roy & Roy set the minimum per-return price?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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| E8-6A | Special Order | |||||||||||||
| Roy & Roy, CPAs currently provides tax return preparation services to individuals in the local community. Roy has received a one-time only request to prepare 100 tax returns for clients of another CPA firm in the community while the owner recovers from major surgery. Roy has the capacity to prepare 700 returns. Roy has an effective income tax rate of 40%. Roy's income statement, before consideration of the one-time only request, is as follows: | ||||||||||||||
| Sales (500 returns at $300 per return) | $ 150,000 | |||||||||||||
| Variable preparation costs | 20,000 | |||||||||||||
| Contribution margin | 130,000 | |||||||||||||
| Fixed preparation costs | 80,000 | |||||||||||||
| Operating income | 50,000 | |||||||||||||
| Income taxes | 20,000 | |||||||||||||
| Net income | $ 30,000 | |||||||||||||
| In negotiating a price for the special request, at what amount should Roy & Roy set the minimum per-return price? |
|
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