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 $55,000.
Standard Multiform Complex
Billing rate $55 $130 $255
Average variable costs (30) (75) (150)
Average contribution margin $25 $55 $105
Number of returns prepared 1,750 500 250
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.
(b) Determine Joe's margin of safety in sales dollars.
- Round answer to the nearest dollar.