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 charged per tax return	$	240		$	1,250		$	2,150
Variable cost per tax return (including wage paid to tax preparer)	$	195		$	1,150		$	1,970
Expected tax returns prepared per year		64,000			8,000			8,000

The total fixed costs per year for the company are $582,400.

Required:

a. What is the anticipated level of profits for the expected sales volumes?

Anticipated profit: __________

b. Assuming that the product mix is the same at the break-even point, compute the break-even point.

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?

Break-even point: __________

Answer 1

The answer has been presented in the supporting sheets. The anticipated profit has been calculated for the first part. For the second breakeven point has been calculated in both terms that is in dollars as well as in units of income returns to be prepared (use the one which you want)and in third part break even point in volume as well as dollars has been calculated.for detailed answer refer the supporting sheets.