Question
Sell Block prepares three types of simple tax returns: individual, partnerships, and (small) corporations. The tax returns have the following characteristics: Individuals Partnerships Corporations Price
Sell Block prepares three types of simple tax returns: individual, partnerships, and (small) corporations. The tax returns have the following characteristics:
Individuals | Partnerships | Corporations | |||||||
Price charged per tax return | $ | 250 | $ | 1,000 | $ | 2,200 | |||
Variable cost per tax return (including wage paid to tax preparer) | $ | 200 | $ | 900 | $ | 2,010 | |||
Expected tax returns prepared per year | 51,000 | 17,000 | 17,000 | ||||||
The total fixed costs per year for the company are $853,600.
Required:
a. What is the anticipated level of profits for the expected sales volumes?
b. Assuming that the product mix is the same at the break-even point, compute the break-even point.
c. Suppose the product sales mix changes so that, for every ten tax returns prepared, six are for individuals, one is for a partnership, and three are for corporations. Now what is the break-even volume for Sell Block?
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