During 2004, Thor Lab supplied hospitals with a comprehensive diagnostic kit for $120. At a volume of 80,000 kits, Thor had fixed costs of $1,000,000 and a profit before income taxes of $200,000. Due to an adverse legal decision, Thor's 2005 liability insurance increased by $1,200,000 over 2004. Assuming the volume and other costs are unchanged, what should the 2005 price be if Thor is to make the same $200,000 profit bef ore income taxes? a. $120.00 b. $135.00 c. $150.00 d. $240.00
During 2004, Thor Lab supplied hospitals with a comprehensive diagnostic kit for $120. At a volume of 80,000 kits, Thor had fixed costs of $1,000,000 and a profit before income taxes of $200,000. Due to an adverse legal decision, Thor's 2005 liability insurance increased by $1,200,000 over 2004. Assuming the volume and other costs are unchanged, what should the 2005 price be if Thor is to make the same $200,000 profit bef ore income taxes? a. $120.00 b. $135.00 c. $150.00 d. $240.00
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:During 2004, Thor Lab supplied hospitals with a comprehensive diagnostic
kit for $120. At a volume of 80,000 kits, Thor had fixed costs of $1,000,000
and a profit before income taxes of $200,000. Due to an adverse legal
decision, Thor's 2005 liability insurance increased by $1,200,000 over 2004.
Assuming the volume and other costs are unchanged, what should the 2005
price be if Thor is to make the same $200,000 profit bef
ore income taxes?
a. $120.00 b. $135.00 c. $150.00 d. $240.00
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