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Painless Dental Clinics offers the following three basic dental services:

Cleaning

Filling

Capping

Price per Unit

$120

$400

$1,200

Variable Cost per Unit

$80

$300

$500

Units sold per year

9,000

900

100

Variable costs include the labor costs of the dental hygienists and dentist. Fixed costs of $300,000 per year include building and equipment costs, marketing costs, and the cost of administration. Painless Dental is subject to a 30 % 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 each tooth as a unit (e.g., putting crowns on two teeth counts as two units).

Required: (SHOW WORK)

1. Given this information, how much will Painless Dental earn each year after taxes?
2. Assuming the given sales mix is the same at what sales revenue does Painless Dental break-even?
3. Assuming the given sales mix, at what sales revenue will Painless Dental earn $140,000 per year after taxes?
4. Painless Dental is considering becoming more specialized in cleanings and fillings. What would be the companys revenues per year if the number of cleanings increased to 12,000 per year and the number of fillings increased to 1,000 per year while the number of cappings dropped to zero. With this change in product mix, the company would increase its fixed costs to $400,000 per year. What would be the effect of this change in product mix on the clinics earnings after taxes per year? If the clinics managers seek to maximize the clinics after tax earnings would this change be a good idea?

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