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 $100 per Year 8,500 1,200 per Unit cleaning $ Filling Capping 160 440 420 1,250 560 300 Variable costs include the labor costs of the dental hygienists and dentists. Fixed costs of $420,000 per year include building and equipment costs, marketing costs, and the costs of administration. Painless Dental Clinics is subject to a 40 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, Ic., break even? c. Assuming the given sales mix, at what sales revenue will the company earn $144,000 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 11,500 per year, the number of fillings increased to 1,300 per year, while the number of cappings dropped to zero? With this change in product mix, the company would increase its fixed costs to $470,000 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?
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 $100 per Year 8,500 1,200 per Unit cleaning $ Filling Capping 160 440 420 1,250 560 300 Variable costs include the labor costs of the dental hygienists and dentists. Fixed costs of $420,000 per year include building and equipment costs, marketing costs, and the costs of administration. Painless Dental Clinics is subject to a 40 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, Ic., break even? c. Assuming the given sales mix, at what sales revenue will the company earn $144,000 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 11,500 per year, the number of fillings increased to 1,300 per year, while the number of cappings dropped to zero? With this change in product mix, the company would increase its fixed costs to $470,000 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?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Assume that Painless Dental Clinics, Inc., offers three basic dental services. The following are its prices and costs.
Price
Variable Cost
Units Sold
Cleaning $
Filling
Capping
per Unit
160
per Unit
$100
per Year
8,500
1,200
440
420
1,250
560
300
Variable costs include the labor costs of the dental hygienists and dentists. Fixed costs of $420,000 per year include building and
equipment costs, marketing costs, and the costs of administration. Painless Dental Clinics is subject to a 40 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 $144,000 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 11,500 per year, the number of fillings increased to 1,300 per year, while the
number of cappings dropped to zero? With this change in product mix, the company would increase its fixed costs to $470,000 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
Req B
Req C
Req D1
Req 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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