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 3:3:4 (easy, moderate, business). Fixed costs total $25,110 for the tax season. Type of Return Easy (form 1040EZ) Moderate (form 1040) Business Fee Charged $ 30 105 255 Variable Cost per Return $ 20 65 90 Fee Charged Total per composite unit (1) Determine the selling price per composite unit. Ratio Easy (form 1040EZ) Moderate (form 1040) 31 Business Total per composite unit (2) Determine the variable costs per composite unit. Ratio Variable cost per return Easy (form 1040EZ) Moderate (form 1040) Business Contribution margin per composite unit Contribution margin (3) Determine the break-even point in composite units. Choose Numerator: Choose Denominator: Break Even Units Break even units

Answer 1

(1) Determine the selling price per composite unit Fee Charged Ratio Total per composite unit Easy (form 1040 EZ) Moderate (form 1040) 90.00 30.00 3 105.00 315.00 Business 255.00 1,020.00 Sales 1,425.00 (2) Determine the variable costs per composite unit Variable costs per return Total per composite unit Ratio Easy (form 1040EZ) Moderate (form 1040) Business Variable costs Contribution margin per composite unit Sales Less: Variable costs Contribution margin 20.00 60.00 3 3 65.00 195.00 4 90.00 360.00 615.00 1,425.00 615.00 810.00 (3) Determine the breakeven point in composite units Choose Numerator Choose Denominator Breakeven Units Fixed costs Contribution margin / Breakeven Units 25,110.00 810.00 31 (4) Determine the number of units of each product that will be sold at the breakeven point Number per Number of composite Unit sales at breakeven composite units to breakeven point unit Easy (form 1040EZ) Moderate (form 1040) 3 31 93 3 31 93 Business 31 124 310