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(LO 3-4) S que 3-68. Extensions of the CVP Model-Multiple Products and Taxes Assume that Limitless Labs, Inc., offers three basic drug-testing services for professional
(LO 3-4) S que 3-68. Extensions of the CVP Model-Multiple Products and Taxes Assume that Limitless Labs, Inc., offers three basic drug-testing services for professional athletes. Its prices and costs are as follows. sund br C. Sto riag Basic Retest. Vital Price per Unit $ 500 800 4,000 Variable Cost per Unit $ 120 400 2,800 Units Sold per Year 850 100 50 Baioq qoo18 1152 2st SdT anon Variable costs include the labor costs of the medical technicians at the lab. Fixed costs of $390,000 per year include building and equipment costs and the costs of administration. A basic "unit" is a routine drug test administered. A retest is given if there is concern about the results of the first test, particularly if the test indicates that the athlete has taken drugs that are on the banned drug list. Retests are not done by the laboratory that performed the basic test. A "vital" test is the labo- ratory's code for a high-profile case. This might be a test of a famous athlete and/or a test that might be challenged in court. The laboratory does extra work and uses expensive expert technicians to ensure the accuracy of vital drug tests. Limitless Labs is subject to a 40 percent tax rate. Required a. Given this information, how much will Limitless Labs earn each year after taxes? b. Assuming the given sales mix is the same at the break-even point, at what sales revenue does Limitless Labs break even? At what sales revenue will the company earn $180,000 per year after taxes assuming the given sales mix?
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