Question & Answer: Assume that Painless Dental Clinics, Inc., offers three basic dental services. Here are its prices and costs Variable Cost per Unit $170 5…..

Assume that Painless Dental Clinics, Inc., offers three basic dental services. Here are its prices and costs Variable Cost per Unit $170 560 770 Price per Unit Cleaning$ 300 580 1,425 Units Sold per Year 8,000 1,700 Filling Capping 300 Variable costs include the labor costs of the dental hygienists and dentists. Fixed costs of $490,000 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. How much will Painless Dental Clinics, Inc., earn each year after taxes? Earns b. Assuming the above sales mix is the same at the break-even point, at what sales revenue does Painless Dental Clinics Inc., break even? (Do not round intermediate calculations. Round your final answer up to the nearest whole unit.) Break-even revenue c. Assuming the above sales mix, at what sales revenue will the company earn $158,000 per year after taxes? (Do not round intermediate calculations.) Sales revenueQuestion & Answer: Assume that Painless Dental Clinics, Inc., offers three basic dental services. Here are its prices and costs Variable Cost per Unit $170 5..... 1

Assume that Painless Dental Clinics, Inc., offers three basic dental services. Here are its prices and costs Variable Cost per Unit $170 560 770 Price per Unit Cleaning$ 300 580 1,425 Units Sold per Year 8,000 1,700 Filling Capping 300 Variable costs include the labor costs of the dental hygienists and dentists. Fixed costs of $490,000 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. How much will Painless Dental Clinics, Inc., earn each year after taxes? Earns b. Assuming the above sales mix is the same at the break-even point, at what sales revenue does Painless Dental Clinics Inc., break even? (Do not round intermediate calculations. Round your final answer up to the nearest whole unit.) Break-even revenue c. Assuming the above sales mix, at what sales revenue will the company earn $158,000 per year after taxes? (Do not round intermediate calculations.) Sales revenue

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Requirement 1:
Given the above information, how much will Painless Dental Clinics, Inc., earn each year after taxes? (Omit the “$” sign in your response.)
Painless Dental Clinics, Inc.
Income statement
Cleaning Filling Caping Total
Sales $2,400,000 $986,000 $427,500 $3,813,500
Less: Variable cost $1,360,000 $952,000 $231,000 $2,543,000
Contribution Margin $1,040,000 $34,000 $196,500 $1,270,500
Less: Fixed Cost $490,000
Profit before taxes $780,500
Less Taxes @20% $156,100
Profit $624,400
b) Assuming the above sales mix is the same at the break­even point, at what sales revenue does Painless Dental Clinics, Inc., break even? (Do not round your intermediate calculation.)
Weighted-average contribution margin percentages for each product. A B C D E = B x C F = B x D G= E-F
Services Units sold per year Weights Price Per unit Variable cost per unit weighted price per unit weighted variable cost per unit weighted contribution margin
Cleaning 8000 80.00% $300 $170 $240 $136 $104
Filling 1700 17.00% $580 $560 $98.6 $95.2 $3.4
Caping 300 3.00% $1,425 $770 $42.75 $23.1 $19.65
Total 10000 100.00% $381.35 $254.3 $127.05
Contribution Margin % = $127.05/$381.35 33.32%
Break Even = Fixed cost ÷ Weighted­ average CM%
Break Even = $490,000/33.32% $1,470,771.35
c)
Before Tax Profit = After Tax Profit/(1- Tax )
Before Tax Profit = $158,000/(1-20%) $197,500
Required revenue: (Fixed cost + Required profit) ÷ Weighted­ average CM%
Required revenue: ($490,000 + $197,500)/33.32% $2,063,582.25
d)
Services Price Per unit Variable cost per unit Units sold per year
Cleaning $300 $170 11000
Filling $580 $560 8000
Caping $1,425 $770 300
Painless Dental Clinics, Inc.
Income statement
Cleaning Filling Caping Total
Sales $3,300,000 $4,640,000 $427,500 $8,367,500
Less: Variable cost $1,870,000 $4,480,000 $231,000 $6,581,000
Contribution Margin $1,430,000 $160,000 $196,500 $1,786,500
Less: Fixed Cost $540,000
Profit before taxes $1,246,500
Less Taxes @20% $249,300
Profit $997,200
d(/2)
Yes, Based on after­ tax profit, Painless Dental Clinics should change the product mix.

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