Gabbard and Fink CPA Firm Leases Tax Software from BGG

question 54

Essay

Gabbard and Fink CPA firm leases tax software from BGG Tax Software Company to prepare federal and state income tax returns.The lease agreement calls for a base charge of $5,000 per year plus $100 per year for each state for which returns are prepared.In addition,Gabbard and Fink are charged $2 $1 for federal and $1 for state for each tax return prepared.All of their clients have federal and state returns prepared,with 60 percent in Arkansas and 40 percent in Oklahoma.
Required:
a.What is the firm's total annual cost for the software if a total 2,500 returns are prepared?
b.What is the firm's cost per unit at a level of 2,500 returns?
c.What is the firm's cost per return if 2,000 are prepared?
d.Besides software lease cost,list five other costs that Gabbard and Fink must consider when they set the price they will charge their clients.

---

Definitions:

Anaphylactic Reaction

A severe, potentially life-threatening allergic reaction that can occur rapidly.

Intravenous Antibiotic

Antibacterial medication administered directly into the vein for faster and more direct absorption in the treatment of infections.

Respirations

The act of breathing; involves inhaling oxygen and exhaling carbon dioxide.

Immunosuppression

The reduced ability of the immune system to fight infections and other diseases, which can be induced intentionally (e.g., for organ transplant patients) or caused by certain conditions.