Question:
(Cost behavior) Flaherty Accounting Services pays $2,000 per month for a tax software license. In addition, variable charges incurred average $9 for every tax return the firm prepares.
a. Determine the total cost and the cost per unit if the firm expects to prepare the following number of tax returns in March 2010:
1. 200
2. 500
3. 800
b. Why does the cost per unit change in (1), (2), and (3) of part (a)?
c. The owner of Flaherty Accounting Services wants to earn a margin (excluding any other direct costs) on tax returns of $15,000 during March. If 200 returns are prepared, what tax return preparation fee should be charged? If that fee is charged and 800 returns are prepared, what is the margin in march?