Question
Multiple Product Break-Even Analysis TPG Tax & Accounting is a full-service CPA firm located in Apache Junction, Arizona. Assume that tax return services are classified
Multiple Product Break-Even Analysis TPG Tax & Accounting is a full-service CPA firm located in Apache Junction, Arizona. Assume that tax return services are classified into one of three categories: standard, complex, and full-service (includes end-of-year bookkeeping with tax return preparation). Assume that TPGs fixed costs (rent, utilities, wages, and so forth) totaled $180,000 last year. Additional information from the prior year follows.
Standard | Complex | Full-Service | |||
Billing rate | $125 | $250 | $150 | ||
Average variable costs | (45) | (65) | (50) | ||
Average contribution margin | $80 | $185 | $100 | ||
Number of returns prepared | 1,000 | 200 | 800 |
Required (a.) Using sales dollar analysis, determine TPGs break-even dollar sales volume
- Enter billing rates and contribution margins using all decimals, when needed.
- Round contribution margin ratio to three decimal places.
- Round break-even sales volume to the nearest dollar.
Product |
Weighted Billing Rate | Weighted Contribution Margin |
Standard | Answer
| Answer
|
Complex | Answer
| Answer
|
Full-Service | Answer
| Answer
|
Total | Answer
| Answer
|
Contribution margin ratio: | Answer
| |
Break-even sales volume: | Answer
|
(b.) Determine TPG's margin of safety in sales dollars. Hint: Use weighted average billing rate.
$Answer
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