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, utlities, and so forth were $55,000. Bling race Average variable costs Average contribution margin Number of returns prepared Standard Multiform Complex $130 $255 75 150) $55 105 $55 1300 25 Required (a.) Determine Joe's break-even dollar sales volume e Round contribution margin to three decimal places . Round break-even sales volume to the nearest dollar Weighted Welghted Contribution Selling Price Margin Complex Tocal Concribution margin ratia Break-even sales volume (b.) Determine Joes margin of safety in sales dollars Round answer to the nearest dollar s o Check

Explanation / Answer

a) Weighted Weighted Selling price CM Standard 38.500 17.500 Multiform 26.000 11.000 Complex 25.500 10.500 Total 90.000 39.000 Contribution margin ratio = 39/90 = 43.333% Break even sales volume = Fixed cost/CM ratio = 55000/43.333% = $       126,924 b) Joe's margin of safety in dollars = Current sales volume-Break even sales volume, Current sales volume in dollars = (1750*55+500*130+250*255) = $       225,000 = Margin of safety = 225000-126924= $          98,076

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