[sydneypettit]

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?

[ma0641]

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

[sydneypettit]

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?

[ma0641]

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.

[sydneypettit]

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

[ma0641]

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

[sydneypettit]

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?

[ma0641]

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%