I already have figured out Part A, its $49,492. I need help solving part B. Please explain as I have other
questions that are similar that I must answer.
Morris Inc. is a management consulting firm that specializes in management training programs. Tackle Manufacturing Inc. has approached Morris to contract for management training for a one-year period. Last year's income statement for Morris is as follows:
Sales Revenue $360,000 Costs: Labor$120,000 Equipment Lease 12,000 Rent 24,000 Utilities 8,400 Supplies 23,600 Other Costs 14,400 Manager's Salary 80,000 Total Costs 282,400 Operating Profit (Loss) $77,600
To satisfy the Tackle contract, another part-time trainer will need to be hired at $42,000. Supplies will increase by 12% and other costs will increase by 15%. In addition, new equipment will need to be leased at a cost of $2,500.
a. What are the differential costs that would be incurred if the Tackle contract is signed?
b. If Tackle will pay $55,000 for one year, should Morris accept the contract? Explain your answer.