Tom’s Tax Services is a small accounting firm that offers tax services to small businesses and individuals. A local store owner has approached Tom about doing his taxes but is concerned about the fees Tom normally charges. The costs and revenues at Tom’s Tax Services are presented below:
|TOM’S TAX SERVICES|
Annual Income Statement
|Operating profit (loss)||$||49,600|
|If Tom gets the store’s business, he will incur an additional $59,500 in labor costs. Tom also estimates that he will have to increase equipment leases by about 5 percent, supplies by 10 percent, and other costs by 5 percent.|
What are the differential costs that would be incurred as a result of adding this new client?