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Assume that Painless Dental Clinics, Inc., offers three basic dental services. The following are its prices and costs. Price Variable Cost Units Sold per Unit $ per Unit $160 per Year 9,000 Cleaning Filling Capping 280 560 540 900 1,400 740 100 Variable costs include the labor costs of the dental hygienists and dentists. Fixed costs of $480,000 per year include building and equipment costs, marketing costs, and the costs of administration. Painless Dental Clinics is subject to a 20 percent tax rate on income. A cleaning "unit" is a routine teeth cleaning that takes about 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). Required: a. Given this information, how much will Painless Dental Clinics, Inc., earn each year after taxes? b. Assuming the given sales mix is the same at the break-even point, at what sales revenue does Painless Dental Clinics, Inc., break even? c. Assuming the given sales mix, at what sales revenue will the company earn $156,000 per year after taxes?

Assume that Painless Dental Clinics, Inc., offers three basic dental services. The following are its prices and costs. Price Variable Cost Units Sold per Unit $ per Unit $160 per Year 9,000 Cleaning Filling Capping 280 560 540 900 1,400 740 100 Variable costs include the labor costs of the dental hygienists and dentists. Fixed costs of $480,000 per year include building and equipment costs, marketing costs, and the costs of administration. Painless Dental Clinics is subject to a 20 percent tax rate on income. A cleaning "unit" is a routine teeth cleaning that takes about 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). Required: a. Given this information, how much will Painless Dental Clinics, Inc., earn each year after taxes? b. Assuming the given sales mix is the same at the break-even point, at what sales revenue does Painless Dental Clinics, Inc., break even? c. Assuming the given sales mix, at what sales revenue will the company earn $156,000 per year after taxes?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Assume that Painless Dental Clinics, Inc. offers three basic dental services. Teh following are its prices and costs. 

Assume that Painless Dental Clinics, Ic., offers three basic dental services. The following are its prices and costs. Price Variable Cost Units Sold per Unit 2$ per Unit $160 per Year 9,000 Cleaning Filling Capping 280 560 540 900 1,400 740 100 Variable costs include the labor costs of the dental hygienists and dentists. Fixed costs of $480,000 per year include building and equipment costs, marketing costs, and the costs of administration. Painless Dental Clinics is subject to a 20 percent tax rate on income. A cleaning "unit" is a routine teeth cleaning that takes about 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). Required: a. Given this information, how much will Painless Dental Clinics, Inc., earn each year after taxes? b. Assuming the given sales mix is the same at the break-even point, at what sales revenue does Painless Dental Clinics, Inc., break even? c. Assuming the given sales mix, at what sales revenue will the company earn $156,000 per year after taxes? d-1. Painless Dental Clinics, Inc., is considering becoming more specialized in cleanings and fillings. What would be the company's revenues per year if the number of cleanings increased to 12,000 per year, the number of fillings increased to 1,000 per year, while the number of cappings dropped to zero? With this change in product mix, the company would increase its fixed costs to $530,000 per year. What would be the effect of this change in product mix on the clinic's earnings after taxes per year? d-2. If the clinic's managers seek to maximize the clinic's after-tax earnings, would this change be a good idea? Complete this question by entering your answers in the tabs below. Req A Reg B Reg C Reg D1 Reg D2 Given this information, how much will Painless Dental Clinics, Inc., earn each year after taxes? Earnings < Req A Req B >
Transcribed Image Text:Assume that Painless Dental Clinics, Ic., offers three basic dental services. The following are its prices and costs. Price Variable Cost Units Sold per Unit 2$ per Unit $160 per Year 9,000 Cleaning Filling Capping 280 560 540 900 1,400 740 100 Variable costs include the labor costs of the dental hygienists and dentists. Fixed costs of $480,000 per year include building and equipment costs, marketing costs, and the costs of administration. Painless Dental Clinics is subject to a 20 percent tax rate on income. A cleaning "unit" is a routine teeth cleaning that takes about 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). Required: a. Given this information, how much will Painless Dental Clinics, Inc., earn each year after taxes? b. Assuming the given sales mix is the same at the break-even point, at what sales revenue does Painless Dental Clinics, Inc., break even? c. Assuming the given sales mix, at what sales revenue will the company earn $156,000 per year after taxes? d-1. Painless Dental Clinics, Inc., is considering becoming more specialized in cleanings and fillings. What would be the company's revenues per year if the number of cleanings increased to 12,000 per year, the number of fillings increased to 1,000 per year, while the number of cappings dropped to zero? With this change in product mix, the company would increase its fixed costs to $530,000 per year. What would be the effect of this change in product mix on the clinic's earnings after taxes per year? d-2. If the clinic's managers seek to maximize the clinic's after-tax earnings, would this change be a good idea? Complete this question by entering your answers in the tabs below. Req A Reg B Reg C Reg D1 Reg D2 Given this information, how much will Painless Dental Clinics, Inc., earn each year after taxes? Earnings < Req A Req B >
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