Unformatted text preview: and uses expensive
expert technicians to ensure the accuracy of vital drug tests. Limitless Labs is subject to a 40
percent tax rate.
Required
a. Given the above information, how much will Limitless Labs earn each year after taxes?
b. Assuming the above sales mix is the same at the breakeven point, at what sales revenue does Resources
✓ Related
Limitless Labs break even?
See pages 000 to 000
c. At what sales revenue will the company earn $180,000 per year after taxes assuming the above
of the Annotated Instructor’s
sales mix?
Edition for general suggesd. L imitless Labs is considering becoming more specialized in retests and vitaltions related to the chapters
cases.
What would be the company’s breakeven revenues per year if the number of in Part One.
retests
increased to 400 per year and the number of vital tests increased to 200 per year, while
the number of basic tests dropped to 100 per year? With this change in product mix, the
1
company would increase fixed costs to $420,000 per year. What would be the effect of
this change in product mix on Limitless Labs’s earnings after taxes per year? If the laboratory’s managers seek to maximize the company’s aftertax earnings, would this change
be a good idea?
cor50782_ch01_001072.indd 1 lan27114_ch03_080109.indd 106 10/5/09 11:09:29 PM 10/23/09 5:25:35 AM REVISED PAGES Chapter 3 Fundamentals of CostVolumeProfit Analysis 1 3.54. Extensions of the CVP Model—Multiple Products and Taxes
PART
Assume that Painless Dental Clinics, Inc., offers three basic dental services. Here are its prices and
costs:
Price
per Unit
Cleaning . . . . . . . . . . . .
Filling . . . . . . . . . . . . . .
Capping . . . . . . . . . . . . Variable Cost
per Unit $ 120
400
1,200 $ 80
300
500 107 (L.O. 4) Units Sold
per Year Orientation
9,000
900
100 S Variable costs include the labor costs of the dental hygienists and dentists. Fixed costs of $400,000
Preparing administration.
per year include building and equipment costs, marketing costs, and the costs of and Organizing
Painless Dental Clinics is subject to a 30 percent tax rate on income.
A cleaning “unit” is a routine teeth cleaning that takes aboutfor Success in College
45 minutes. A ﬁlling “unit” is the
work done to ﬁll one or more cavities in one session. A capping “unit” is the work done to put a
crown on one tooth. If more than one tooth is crowned in a session, then the clinic counts one unit
per tooth (e.g., putting crowns on two teeth counts as two units). Yourself Required
a. Given the above information, how much will Painless Dental Clinics, Inc., earn each year after
taxes?
b. Assuming the above sales mix is the same at the breakeven point, at what sales revenue does
Painless Dental Clinics, Inc., break even?
c. Assuming the above sales mix, at what sales revenue will the company earn $140,000 per year
after taxes?
CHAP
ERS
d. Painless Dental Clinics, Inc., is considering becoming more specialized in cleaningsTand ﬁll I N P A R T O N
ings. What would be the company’s revenues per year if the number of cleanings increased...
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 Spring '07
 MEJIAS
 Contribution Margin, CVP analysis

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