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Should morris accept the contract

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Reference no: EM132484588

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.

Question a. What are the differential costs that would be incurred if the Tackle contract is signed?

Question b. If Tackle will pay $55,000 for one year, should Morris accept the contract? Explain your answer.

Reference no: EM132484588

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