Question - C-V-P Analysis in a Service Business
Luke Ticci, CPA, is the owner of a firm that provides tax services. The firm charges $50 per return for the direct professional labor involved in preparing standard short -form tax returns. In January, the firm prepared 850 such returns; in February, 1000; and in March, 700. Service overhead (telephone and utilities, depreciation on equipment and building, tax forms, office supplies, and wages of clerical personnel) for January was $18,500; for February, $20,000; and for March, $17,000.
1. Determine the variable and fixed cost components of the firm's Service Overhead account.
2. What would the estimated total cost per tax return be if the firm prepares 825 standard short-form tax returns in April?