Luke Ricci, CPA, is the owner of a firm that provides tax services. The firm cha

Question

Luke Ricci, 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, 1,000; 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.

Determine the variable andfixed costcomponents of the firm's Service Overhead account.

What would the estimated total cost per tax return be if the firm prepares 825 standard short-form tax returns in April? Round your answer to two decimal places.
$

Explanation / Answer

No. of returns in Jan =850

Overhead in Jan=18500

No of returns in Feb=1000

overhead in Feb=20000

Hence variable overhead cost per return = (20000-18500)/(1000-850)

=1500/150

=10

So, fixed overhead cost =20000 -1000*10

=10000

No.of returns in Apr =825

So, total cost =10000+825(50+10)

=59500

So, total cost per return =59500/825

=72.12

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