R&R Tax Service offers tax and consulting services to individuals and small busi
ID: 2567659 • Letter: R
Question
R&R Tax Service offers tax and consulting services to individuals and small businesses. Data for fees and costs of three types of tax returns follow. R&R provides services in the ratio of 4:3:3 (easy, moderate, business). Fixed costs total $19,800 for the tax season.
R&R Tax Service offers tax and consulting services to individuals and small businesses. Data for fees and costs of three types of tax returns follow. R&R provides services in the ratio of 4:3:3 (easy, moderate, business). Fixed costs total $19,800 for the tax season.
Explanation / Answer
1) Determining the Selling Price Per Composite Unit: Ratio Fee Charged Total Per Composite Unit Easy (Form 1040EZ) 4 64 256 Moderate (Form 1040) 3 139 417 Business 3 289 867 1540 2) Determining the Variable Cost Per Composite Unit: Ratio Variable Cost Per Return Total Per Composite Unit Easy (Form 1040EZ) 4 37 148 Moderate (Form 1040) 3 82 246 Business 3 107 321 715 Contribution Margin Per Composite Unit: Sales 1540 less: Variable Costs 715 Contribution Margin 825 3) Determining the Break-Even Point in Composite Units: Choose Numerator / Choose Denominator = Break Even Units Total Fixed Costs / Contribution Margin Per Unit = Break Even Units 19800 / 825 = 24 4) Determining the Number of Units of Each Product that will be Sold at Break-Even Point: Number Per Composite Unit Number of Composite Units to Break Even Unit Sales at the Break-Even Point Easy (Form 1040EZ) 4 24 96 Moderate (Form 1040) 3 24 72 Business 3 24 72 240
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