B-You is a consulting firm that works with managers to improve their interpersonal skills. Recently,...
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Accounting
B-You is a consulting firm that works with managers to improve their interpersonal skills. Recently, a representative of a high-tech research firm approached B-You's owner with an offer to contract for one year with B-You to improve the interpersonal skills of a newly hired manager. B-You reported the following costs and revenues during the past year.
B-YOU
Annual Income Statement
Sales revenue
$
253,900
Costs
Labor
118,000
Equipment lease
16,300
Rent
13,900
Supplies
10,300
Officers' salaries
79,000
Other costs
8,700
Total costs
$
246,200
Operating profit (loss)
$
7,700
If B-You decides to take the contract to help the manager, it will hire a full-time consultant at $84,500. Equipment lease will increase by 5 percent. Supplies will increase by an estimated 10 percent and other costs by 15 percent. The existing building has space for the new consultant. No new offices will be necessary for this work.
Required information
Required:
a. What are the differential costs that would be incurred as a result of taking the contract?
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