Question

Tina, an entrepreneurial business​ student, wants to set up a business completing tax forms for other students. Her price would be ​$ 52.00 52.00 for each job. Fixed expenses include ​$ 90.00 90.00 for the tax software which Tina would purchase. Tina would hire some accounting students to complete the​ forms, paying them for three three hours at ​$ 14 14 per hour for each job. She would also have paper and supplies costs of ​$ 5 5 per job. How many jobs would she have to generate before she starts to make a​ profit? Make the assumption that it takes an accounting student three three hours to complete one tax return. Tina would have to generate nothing tax returns tax returns before she starts to make a profit. ​(Round up to the nearest​ unit.)

Answer 1

The number of tax returns Tina would have to generate before she starts making profit can be determined with the use of Break-Even Point formula given as below:

Break-Even Point (in Number of Tax Returns) = Fixed Cost/(Selling Price Per Job - Variable Cost Per Job)

_____

Solution:

Here, Fixed Cost = $90, Selling Price Per Job = $52 and Variable Cost Per Job = 3*14 + 5 = $47

Substituting these values in the above formula, we get,

Break-Even Point (in Number of Tax Returns) = (90)/(52 - 47) = 18 tax returns (answer)

Tina would have to generate 18 tax returns before she starts to make a profit.