DeMont Tax Services provides primarily two lines of service: accounting and tax. Accounting-related services represent 60% of its revenue and provide a contribution margin ratio of 30%. Tax services represent 40% of its revenue and provide a 40% contribution margin ratio. The company's fixed costs are $4,590,000.
Instructions
(a) Calculate the revenue from each type of service that the company must achieve to break even.
(b) The company has a desired net income of $1,700,000. What amount of revenue would DeMont earn from tax services if it achieves this goal with the current sales mix?

Question

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The Answer of DeMont Tax Services provides primarily two lines of service: accounting and tax. Accounting-related services represent 60% of its revenue and provide a contribution margin ratio of 30%. Tax services represent 40% of its revenue and provide a 40% contribution margin ratio. The company's fixed costs are $4,590,000.
Instructions
(a) Calculate the revenue from each type of service that the company must achieve to break even.
(b) The company has a desired net income of $1,700,000. What amount of revenue would DeMont earn from tax services if it achieves this goal with the current sales mix?

DeMont Tax Services Provides Primarily Two Lines of Service: Accounting