Chapter 8, Problem 8.13MA

Summary Introduction

Case summary:

The dentists are finding an opportunity in the dental house calls with the aging population and patients The Dental Group B has taken its services in City S and City NY to perform their daily exams and cleaning to root canals. Some of the patients are wealthy and their preference is towards the personal service whereas the other elderly people prefer the personal service.

Recreation of the dental office in the house needs the extra equipments like dental drill, portable X-ray machines, sterile water tanks, lights, and laptop. The cost of the portable X-ray machine is $8,000. It is assumed that the fixed cost of adding the mobile service will rise by $20,000and the desired contribution margin is of 40%.

Introduction:

Costs of production and sales do not vary in the particular period of time is the fixed cost. For example rent, salary, interest should be paid on monthly basis whether the company produces products or not.

To determine: The type of fixed cost that is associated with the service. The sales amount that is essential to break even an increase in the fixed cost to provide the extra service.