Taff Services offers three core accounting and bookkeeping services. After a cost behaviour study, the following profitability analysis has been prepared

The management of Taff Services estimates that the total fees mix (52%:28%:20%) is generally representative.

Required
a. Calculate the contribution margin ratios for each of the three areas of activity, and in total.
b. Using the total contribution margin ratio, calculate the level of fees required to break even.
c. Prepare a statement of profit or loss at break-even level of fees as calculated in (b).

Transcribed Image Text:

Taff Services Profitability analysis for 12 months ending 31 December 2016 Bookkeeping Account management $300 000 180 000 120 000 Fees Less: Variable costs Contribution margin Direct fixed costs Common fixed costs Utilities Other administration Total fixed costs Profit 25 000 Advisory $160000 96 000 64 000 35 000 $120000 72 000 48 000 18000 Total $580 000 348 000 232 000 78 000 31.000 36 000 145 000 $ 87 000