ABC BioMed Labs, LLC analyzes blood samples (aka "lab tests") for medical practitioners. As part of its strategic planning process, ABC's management team has come together for a weekend retreat.  Attendees at the retreat will address varying issues including capital investment decisions, levels of output, make-or-buy decisions, etc. To assist management, the firm's accountants have analyzed past records, and provided certain information that may be relevant to the issues to be addressed during the retreat.

 

Annual Fixed Costs:                    $110,000.00

Variable Costs for a Lab Analysis:                          $30.00

Amount Charged (revenue) Per Analysis               $80.00

 

You are asked to do the following: (answers are in units of output, i.e., # of lab tests):

 

(a) Make and then solve an equation (formula) that indicates how many lab tests must be performed if the company is to breakeven ("0" profit)?

 

(b)Make and solve an equation that indicates how many analyses must be performed if the company is to earn a $40,000 net profit before taxes?

 

(c) Make and solve an equation that indicates how many analyses must be performed if the company is to earn a $40,000 net after-tax profit, assuming the company is in a 25% tax bracket.

Answer rating: 100% (QA)

a To break even the total revenue earned from the lab tests must equal the total cost incurred Lets ... View the full answer