Mel Snow is the manager of a firm, Taxation Matters, which specialises in the preparation of income tax returns. The firm offers two basic products: the preparation of income tax returns for wage and salary earners, and the preparation of income tax returns for small businesses. Any clients requiring more complex services are referred to Snow's brother Roger, who is a partner in a large firm of chartered accountants. The processing of wage and salary tax returns is quite straightforward, and the firm uses a software package to process data and print the return. A software package is also used to prepare returns for small businesses, although more information is required, particularly about business expenses. Snow has only recently joined Taxation Matters and he is concerned about the firm's pricing policy, which sets flat fees of $60 per return for wage and salary clients and $300 for small businesses. He decides to use activity-based costing to estimate the costs of providing each of these services. At the end of the year, Snow reviewed the firm's total costs and activities, resulting in the following list: Activity cost Activity driver $ 60,000 Quantity of activity driver Activity Interview salaried client No. of salaried clients 8,000
Mel Snow is the manager of a firm, Taxation Matters, which specialises in the preparation of income tax returns. The firm offers two basic products: the preparation of income tax returns for wage and salary earners, and the preparation of income tax returns for small businesses. Any clients requiring more complex services are referred to Snow's brother Roger, who is a partner in a large firm of chartered accountants. The processing of wage and salary tax returns is quite straightforward, and the firm uses a software package to process data and print the return. A software package is also used to prepare returns for small businesses, although more information is required, particularly about business expenses. Snow has only recently joined Taxation Matters and he is concerned about the firm's pricing policy, which sets flat fees of $60 per return for wage and salary clients and $300 for small businesses. He decides to use activity-based costing to estimate the costs of providing each of these services. At the end of the year, Snow reviewed the firm's total costs and activities, resulting in the following list: Activity cost Activity driver $ 60,000 Quantity of activity driver Activity Interview salaried client No. of salaried clients 8,000
Chapter6: Business Expenses
Section: Chapter Questions
Problem 91EDC
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Transcribed Image Text:Mel Snow is the manager of a firm, Taxation Matters, which specialises in the preparation of income
tax returns. The firm offers two basic products: the preparation of income tax returns for wage and
salary earners, and the preparation of income tax returns for small businesses. Any clients requiring
more complex services are referred to Snow's brother Roger, who is a partner in a large firm of
chartered accountants.
The processing of wage and salary tax returns is quite straightforward, and the firm uses a software
package to process data and print the return. A software package is also used to prepare returns for
small businesses, although more information is required, particularly about business expenses.
Snow has only recently joined Taxation Matters and he is concerned about the firm's pricing policy,
which sets flat fees of $60 per return for wage and salary clients and $300 for small businesses. He
decides to use activity-based costing to estimate the costs of providing each of these services.
At the end of the year, Snow reviewed the firm's total costs and activities, resulting in the following
list:
Activity cost Activity driver
$ 60,000
Quantity of activity driver
Activity
Interview salaried client
No. of salaried clients 8,000
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