Question

wondering how to figure this out. also show steps for wach one

15. Dental Comfort Services provides dental cleanings to its patients. The selling price of a cleaning is $150 and the variable costs associated are $85. The monthly relevant fixed costs are $10,000. Required: a. What is the breakeven point in cleanings? b. What is the margin of safety in dollars, assuming sales total $30,000? c. What is the breakeven level in cleanings, assuming variable costs decrease by 20%? d. What is the breakeven level in dollars, assuming the selling price goes down by 10% and fixed costs increase $1,000 per month?

Answer 1

Contribution margin per cleaning = Selling price per cleaning – variable cost per cleaning

= 150-85

= $65 per cleaning

a.Break even point = Fixed costs/Contribution margin per cleaning

= 10,000/65

= 153.85 cleanings

i.e. 154 cleanings

b. Margin of safety in dollars = Sales – break even sales

= 30,000 – 154*150

= $6,900

OR

30,000 – 153.85*150

= $6,922.5

c.Break even level = 10,000/(150-68)

= 121.95 i.e. 122 cleanings

d.CM Ratio = CM/Sales

= (145-85)/145 = 0.413793

Break even dollars = Fixed costs/CM Ratio

= 11000/0.413793

= $26,583.33