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 5:3:2 (easy, moderate, business). Fixed costs total $18,000 for the tax season.   

Type of Return	Fee Charged					Variable Cost per Return
Easy (form 1040EZ)		$	50				$	30
Moderate (form 1040)			125					75
Business			275					100

Answer 1

Answer:-

Total Sales value
Type of return	Ratio	Fess charged	Total Fees received
	(a)	(b)	$ (c=a*b)
Easy (form 104EZ)	5	50	250
Moderate (form 1040)	3	125	375
Business	2	275	550
			1175

Total cost per composite unit
	Ratio	Variable cost per return	Variable cost per composite unit
	(a)	(b)	$ (c=a*b)
Easy (form 104EZ)	5	30	150
Moderate (form 1040)	3	75	225
Business	2	100	200
		Total	575

Contribution margin per composite unit
Particulars	Amount
Sales	$1175
Less:- Variable costs	$575
Contribution margin	$600

Break even point in composite units =Fixed costs/Contribution margin per unit

=$18000/$600 =30 composite units