Question

Multiple Product Break-Even Analysis
TPG Tax & Accounting is a full-service CPA firm located in Apache Junction, Arizona. Assume that tax return services are classified into one of three categories: standard, complex, and full-service (includes end-of-year bookkeeping with tax return preparation). Assume that TPG’s fixed costs (rent, utilities, wages, and so forth) totaled $180,000 last year. Additional information from the prior year follows.

			Standard	Complex	Full-Service
Billing rate			$125	$250	$150
Average variable costs			(45)	(65)	(50)
Average contribution margin			$80	$185	$100
Number of returns prepared			1,000	200	800

Required
(a.) Using sales dollar analysis, determine TPG’s break-even dollar sales volume

• Enter billing rates and contribution margins using all decimals, when needed.
• Round contribution margin ratio to three decimal places.
• Round break-even sales volume to the nearest dollar.

Product	Weighted Billing Rate	Weighted Contribution Margin
Standard	Answer	Answer
Complex	Answer	Answer
Full-Service	Answer	Answer
Total	Answer	Answer
Contribution margin ratio:		Answer
Break-even sales volume:		Answer

(b.) Determine TPG's margin of safety in sales dollars. Hint: Use weighted average billing rate.

$Answer

Answer 1