Special Order Decision
SE 6. Smith Accounting Services is considering a special order that it received from one of its corporate clients. The special order calls for Smith to prepare the individual tax returns of the corporation’s four-largest shareholders. The company has idle capacity that could be used to complete the special order. The following data have been gathered about the preparation of individual tax returns:
|
Materials cost per page |
$1 |
|
Average hourly labor rate |
$60 |
|
Standard hours per return |
4 |
|
Standard pages per return |
10 |
|
Variable overhead cost per page |
$0.50 |
|
Fixed overhead cost per page |
$0.50 |
Smith Accounting Services would be satisfied with a $40 gross profit per return. Compute the minimum bid price for the entire order.