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Foster Hancock is an accountant just ready to open an accounting firm in his hometown. He has heard that established accountants in town charge $65 per hour. That sounds good to Foster. In fact, he believes that he should be able to charge $75 an hour given his high GPA and the fact that he is up to date on current accounting issues. Required: Should Foster charge $75 per hour? What would you advise him to do?

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Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663

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Chapter
Section
BuyFindarrow_forward

Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663
Chapter 18, Problem 12E
Textbook Problem
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Foster Hancock is an accountant just ready to open an accounting firm in his hometown. He has heard that established accountants in town charge $65 per hour. That sounds good to Foster. In fact, he believes that he should be able to charge $75 an hour given his high GPA and the fact that he is up to date on current accounting issues.

Required:

Should Foster charge $75 per hour? What would you advise him to do?

To determine

Determine whether Person F should charge $75 per hour for services and provide suggestions.

Explanation of Solution

Person F would be recommended not to charge $75 per hour for services, because accounting firm belongs to a monopolistically competitive market structure and there are many accountants providing such services (auditing, tax, management advisory services) in the market that averages $65 per hour. So, the client would not pay much more than the prevailing charges of $65 per hour.

Person F could adopt penetration pricing strategy since; he is new to the industry. Person F should be engaged in some accounting jobs. Engaging in accounting jobs would gain him experience and can develop his accounting skills...

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Chapter 18 Solutions

Cornerstones of Cost Management (Cornerstones Series)
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