Computer Tax

Kerry Dodson owns and operates an income tax preparation service and is trying to determine his rates for 2010. Last year Kerry decided to work with a local bank that processes returns directly to the IRS. He believes this relationship should really help his business. He is developing his budget for 2008 and has the following information available:

Estimated charge per tax return: $350
Variable cost of material necessary to prepare each return: $12.50
Secretarial cost: $18,000/year
Administrative costs: $10,000/year
Depreciation: $ 15,000/year
Rent: $12,000/year
Cost of continuing education: $2,000/year

Required:

1. What are the contribution margin, the break-even volume, and the break-even sales in dollars?

2. Prepare a variable costing income statement for Dodson, assuming that he prepared 300 returns.

3. Dodson is considering advertising his service, which will cost an additional $2,000 per year. In addition, he would like to consider raising his rate by 15 percent. He believes both changes will increase total volume by 12 percent. Complete Questions 1 and 2 using this new information.

4. Prepare a budgeted variable costing income statement that com¬pares volumes of 80 percent, 90 percent, 100 percent, 110 percent, and 120 percent of break-even volume, based on Question 3.

5. Follow the same information you covered on tutorial 9 and 10. Assuming use the same table and data analysis( Table of cost volume profit analysis).

6. Calculate the break even Table ( assuming that the relative range was between 0-30,000 units of production , increments by 5,000 units)

7. Use pivot table to compare between the different volumes of productions. Hint BE unit= Fixed cost/ CM