Multiple Product Break-Even Analysis Joe\'s Tax Service prepares tax returns for

Question

Multiple Product Break-Even Analysis
Joe's Tax Service prepares tax returns for low-to middle-income taxpayers. Its service operates January 2 through April 15 at a counter in a local grocery store. All jobs are classified into one of three categories: standard, multiform, and complex. Following is information for last year. Also, last year, the fixed cost of rent, utilities, and so forth were $60,000.

Required
(a.) Determine Joe's break-even dollar sales volume.

Round contribution margin to three decimal places.

Round break-even sales volume to the nearest dollar.

Product

Weighted

Selling Price

Weighted

Contribution

Margin

(b.) Determine Joe's margin of safety in sales dollars.

Round answer to the nearest whole number.
$Answer

Standard Multiform Complex Billing rate $60 $135 $260 Average variable costs (30) (75) (150) Average contribution margin $30 $60 $110 Number of returns prepared 1,750 500 250

Explanation / Answer

Answer (a)

Note : Computation of % of sales based on number of return

Weighted Selling Price

Weighted Contribution Margin

Answer (b)

Note :

Actual Sales = ($60 * 1,750) + ($135 * 500 ) + ($260 * 250) = $105,000 + $67,500 +$65,000 = $237,500

Margin of safety in sales dollars = Actual sales - Break-even dollar sales

= $237,500 - $129,545 = $107,955

Number of returns prepared % Standard 1,750 1,750 / 2,500 = 70 % Multiform 500 500 / 2,500 = 20 % Complex 250 250/ 2,500 = 10 % Total   2,500

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