Arvin Tax Preparation Services has total budgeted revenues for 2014 of $ 618,000, based on an average price of $ 206 per tax return prepared. The company would like to achieve a margin of safety percentage of at least 45%. The company’s current fixed costs are $ 327,600, and variable costs average $ 24 per customer. (Consider each of the following separately).
1. Calculate Arvin’s breakeven point and margin of safety in units.
2. Which of the following changes would help Arvin achieve its desired margin of safety?
a. Average revenue per customer increases to $ 224.
b. Planned number of tax returns prepared increases by 15%
c. Arvin purchases new tax software that results in a 5% increase to fixed costs but e-files all tax returns, which reduces mailing costs an average $ 2 per customer.