Sell Block prepares three types of simple tax returns:
individual, partnerships, and (small) corporations. The tax returns
have the following characteristics:
The total fixed costs per year for the company are $957,900.
Required:
a. What is the anticipated level of profits for the expected sales volumes?
b. Assuming that the product mix is the same at the break-even point, compute the break-even point.
c. Suppose the product sales mix changes so that, for every ten tax returns prepared, six are for individuals, one is for a partnership, and three are for corporations. Now what is the break-even volume for Sell Block?
| Individuals | Partnerships | Corporations | |||||||
| Price charged per tax return | $ | 260 | $ | 1,050 | $ | 1,800 | |||
| Variable cost per tax return (including wage paid to tax preparer) | $ | 205 | $ | 950 | $ | 1,600 | |||
| Expected tax returns prepared per year | 54,000 | 18,000 | 18,000 | ||||||
Required:
a. What is the anticipated level of profits for the expected sales volumes?
b. Assuming that the product mix is the same at the break-even point, compute the break-even point.
c. Suppose the product sales mix changes so that, for every ten tax returns prepared, six are for individuals, one is for a partnership, and three are for corporations. Now what is the break-even volume for Sell Block?
