Tom’s Tax Services is a small accounting firm that offers tax services to small businesses and individuals. A local store owner has approached Tom about doing his taxes but is concerned about the fees Tom normally charges. The costs and revenues at Tom’s Tax Services are presented below:
| TOM’S TAX SERVICES Annual Income Statement | ||
| Sales revenue | $ | 720,000 |
| Costs | ||
| Labor | 477,000 | |
| Equipment lease | 50,400 | |
| Rent | 43,200 | |
| Supplies | 32,400 | |
| Tom’s salary | 75,000 | |
| Other costs | 22,800 | |
| Total costs | $ | 700,800 |
| Operating profit (loss) | $ | 19,200 |
If Tom gets the store’s business, he will incur an additional $60,000 in labor costs. Tom also estimates that he will have to increase equipment leases by about 10 percent, supplies by 5 percent, and other costs by 15 percent. |
| Required: |
| a. | What are the differential costs that would be incurred as a result of adding this new client?  |