Question

If a CPA firm that prepares both individual and corporate tax returns decides to stop preparing individual returns becuase they just lose money, which of the following costs will the firm likely avoid?

A General firm overhead that was allocated to individual clients.

B Building depreciation.

C Insurance.

D Variable operating costs.

E Monthly installment payments on general purpose computer equipment.

Answer 1

Answer : variable operating cost .

Explanation: As the CPA firm discontinues the return filling for individuals clients ,the variable cost can be avoided by the firm.

Variable cost , as  the word it self it suggests that it varies.  As the client increases the variable cost also increases and vice versa.

Building depreciation , insurance and monthly installment on general equipment will remain same whether individual tax returns are continued or stopped.

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