Question

Multiple Product Break-Even Analysis
Joe's Tax Service prepares tax returns for low-to middle-income taxpayers. Its service operates January 2 through April 15 at a counter in a local grocery store. All jobs are classified into one of three categories: standard, multiform, and complex. Following is information for last year. Also, last year, the fixed cost of rent, utilities, and so forth were $55,000.

			Standard	Multiform	Complex
Billing rate			$55	$130	$255
Average variable costs			(30)	(75)	(150)
Average contribution margin			$25	$55	$105
Number of returns prepared			1,750	500	250

Required
(a.) Determine Joe's break-even dollar sales volume.

Round contribution margin to three decimal places.

Round break-even sales volume to the nearest dollar.

Product	Weighted Selling Price	Weighted Contribution Margin
Standard	$Answer	$Answer
Multiform	Answer	Answer
Complex	Answer	Answer
Total	$ Answer	$ Answer
Contribution margin ratio:		Answer
Break-even sales volume:		$Answer

(b.) Determine Joe's margin of safety in sales dollars.

Round answer to the nearest dollar.
$Answer

Answer 1

Solution:
(a)	Product	Weighted Selling Price	Weighted Contribution Margin
	Standard	(55*1750)/2500 38.5	(25*1750)/2500 17.5
	Mutliform	(130*500)/2500 26	(55*500)/2500 11
	Complex	(255*250)/2500 25.5	(105*250)/2500 10.50
	Total	(38.5+36+25.5) 90	(17.5+11+10.50) 39
	Contriution Margin Ratio	(Total Weighted Contribution/ Total Weighted Selling Price)	39/90 0.433
	Break Even Sales Volume	Total Fixed Cost/ Contribution Margin	55000/0.43333333 126923
(b)	Determine the margin of safety in dollar:
	Total Sales
	Standard	(55*1750)	96250
	Mutliform	(130*500)	65000
	Complex	(255*250)	63750
			225000
	Less: Break Even Sales		126923
	Margin of Safety		98077