R&R; Tax Service offers tax and consulting services to individuals and small bus

Question

R&R; Tax Service offers tax and consulting services to individuals and small businesses. Data for fees and costs of three types of returns follow. R&R; provides services in the ratio of 5:3:2 (easy, moderate, business). Fixed costs total $18,000 for the tax seasor Easy (form 1848EZ) Moderate (form 1848) Business $ 50 125 275 s 30 75 18e (1) Determine the selling price per site unit Ratio Fee Charged Total per composite unit Easy (form 1040Ez) Moderate (form 1040) Determine the variable costs per composite unit Rato Variable cost per return Total per composite unit Easy (form 1040EZ) Moderate (form 1040) BusinesS Contribution margin per composite unit Contribution margin (3) Determine the break-even point in composite units Choose Numerator Choose Denominator. Break even units

Explanation / Answer

1 Ratio Fee charged Total per composite unit Easy (form 1040 EZ) 5 $50 $250 Moderate (form 1040) 3 $125 $375 Business 2 $ 275 $ 550 $ 1,175 2 Ratio Variable cost per return Total per composite unit Easy (form 1040 EZ) 5 $ 30 $ 150 Moderate (form 1040) 3 $ 75 $ 225 Business 2 $ 100 $ 200 $ 575 Contribution margin per composite unit Sales $    1,175 Less: Variable cost $        575 Contribution margin $        600 3 Choose Numerator / Choose Denominator = Break even units Total Fixed cost / Contribution margin per unit = Break even units $ 18,000 / $ 600 = $          30 4 Number per composite unit Number of composite units to breakeven Unit sales at the breakeven point Easy (form 1040 EZ) 5 $                      30 150 returns Moderate (form 1040) 3 $                      30 90 returns Business 2 $                      30 60 returns 300 returns

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