An Accounting Firm Charges $2500 for an Audit and $350

question 47

Multiple Choice

An accounting firm charges $2500 for an audit and $350 for a tax return.Research and available resources have indicated the following constraints. The firm has 900 hours of staff time available each week.
The firm has 155 hours of review time available each week.
Each audit requires 75 hours of staff time and 10 hours of review time.
Each tax return requires 12.5 hours of staff time and 2.5 hours of review time.
The accounting firm lowers its charge for an audit to $2000.What numbers of audits and tax returns will bring in an optimal revenue?

• A) The optimal revenue will be $24,700 if the firms does 5 audits and 42 tax returns each week.
• B) The optimal revenue will be $24,000 if the firms does 12 audits and 0 tax returns each week.
• C) The optimal revenue will be $21,700 if the firms does 0 audits and 62 tax returns each week.
• D) The optimal revenue will be $0 if the firms does 0 audits and 0 tax returns each week.
• E) The optimal revenue will be $30,000 if the firms does 12 audits and 0 tax returns each week.

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Definitions:

Monetary Cost

Refers to the explicit financial cost of conducting a business activity or completing a transaction, measured in units of currency.

Comparative Advantage

The ability of a party to produce a particular good or service at a lower opportunity cost than others, enabling trade benefits.

Absolute Advantage

The ability of an entity to produce a good or service more efficiently than its competitors with the same resources.

Absolute Advantage

The ability of a country, individual, or firm to produce a good more efficiently than another entity, using fewer resources.