QUESTION 8 Tries remaining:1 Points out of 15.00 g question Multiple Product Bre
ID: 2412423 • Letter: Q
Question
QUESTION 8 Tries remaining:1 Points out of 15.00 g 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 $50,000 Billing rate Average variable costs Average contribution margin Number of returns prepared Standard Multiform Complex $125 S250 (75 (150) 100 550 520 $50 1,750 500 Required (a.) Determine Joe's break-even dollar sales volume. Weighted Margin Weighted Contribution Selling Price Product Standard Complex Tota Contribution margin ratio: Break-even sales volume:Explanation / Answer
Answer
No. of return prepared
% of total
Standard
1750
70%
Multiform
500
20%
Complex
250
10%
Total
2500
100%
Sales Mix %
Selling Price
Weighted Selling Price
Contribution margin
Weighted Contribution margin
[A]
[B]
[C = A x B]
[D]
[E = A x D]
Standard
70%
$ 50.00
$ 35.00
$ 20.00
$ 14.00
Multiform
20%
$ 125.00
$ 25.00
$ 50.00
$ 10.00
Complex
10%
$ 250.00
$ 25.00
$ 100.00
$ 10.00
Total
100%
$ 85.00 [Answer]
$ 34.00 [Answer]
A
Weighted Selling Price
$ 85.00
B
Weighted Contribution margin
$ 34.00
C=(B/A) x 100
Contribution margin ratio [34/85]
40%
A
Fixed Cost
$ 50,000.00
B
Contribution margin ratio calculated above
40%
C= A/B
Break Even Sales Volume [50000/40%]
$ 125,000.00
No. of return prepared
% of total
Standard
1750
70%
Multiform
500
20%
Complex
250
10%
Total
2500
100%
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