Question
Sell block prepares three types of simple tax returns: individual, partnerships, and small corporations. The tax returns have the following characteristics: Price charged per tax
Sell block prepares three types of simple tax returns: individual, partnerships, and small corporations. The tax returns have the following characteristics:
Price charged per tax return: Individuals: $200 Partnerships: $1000 Corporations: $2000
Variable cost per tax return (including wage paid to tax preparer): Individuals: $180 Partnerships: $900 Corporations: $1,800
Expected tax returns prepared per year: Individuals: 60,000 Partnerships: 4,000 Corporations: 16,000
The total fixed costs per year for the company are $3,690,000
A. What is the expected profit?
B. What is the expected break-even point in total units and in total revenues?
C. Given the expected sales mix, how many total returns does Sell have to prepare to earn an after tax profit of $500,000 after tax. Assume the tax rate is 20%.
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