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?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

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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