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 $310 per return) $155,000 Variable preparation costs 21,000 Contribution margin 134,000 Fixed preparation costs 80,000 Operating income 54,000 Income taxes 21,000 Net income $32,400 In negotiating a price for the special request, at what amount should Roy & Roy set the minimum per-return price?
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 $310 per return) $155,000 Variable preparation costs 21,000 Contribution margin 134,000 Fixed preparation costs 80,000 Operating income 54,000 Income taxes 21,000 Net income $32,400 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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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 $310 per return) | $155,000 |
| Variable preparation costs | 21,000 |
| Contribution margin | 134,000 |
| Fixed preparation costs | 80,000 |
| Operating income | 54,000 |
| Income taxes | 21,000 |
| Net income | $32,400 |
In negotiating a price for the special request, at what amount should Roy & Roy set the minimum per-return price?
$Answer minimum per-return price
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