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
$
310

$
1,000

$
2,050



Variable cost per tax return (including
wage paid to tax preparer)
$
260

$
900

$
1,860



Expected tax returns prepared per year

56,000


7,000


7,000









The total fixed costs per year for the company are $669,300.





Required:




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

Good homework question, however, we don't do it for you. All of the numbers are in front of you except for figuring out gross revenue. Price-variable cost X # of returns

Im confused. I don't expect to just get an answer. Could you explain a little better on how to use the formula to get the expected sales volumes?

You have the price/return. Subtract the variable cost and multiply that by the number of expected returns. Look at the first example. 310-260=? Multiply by 56,000. What do you get? Do the same for all others. That is gross income. Subtract fixed =Net profit. The rest is up to you.

Okay thanks I get it now! Im sorry to bother you again, but I just have one more question. Part 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? Again, I'm sorry to bother, but I don't want to get this question wrong. I want to understand how to get the answer

6+3+1 add up to 100% therefore 10, 30 and 60%. What is the breakeven? Sales = expenses.

So for example I would multiply 6 by the tax return? And then what do I do?

Or wait... Do I just take 669,300/100?

What was the total gross revenue from the first part? They are proportional. First determine the ratios for the first answer. Then adjust the ratios to represent Part C 10%, 30%, 60%