*Use the information provided in Question 4a to answer this question.

4b. If $180 per test is charged, how many tests must be processed each year to break even? (4 marks)

*Use the information provided in Question 4a to answer this question.

4c. For a target annual profit of $180,000, how many tests (at $180 each) must be processed? (4 marks)

*Use the information provided in Question 4a to answer this question.

4d. The managing director of MMC made the following remark: Break-even analysis has little relevance for our business. We are not in business to break even, but to make profits. Do you agree with this statement? Explain your position. (6 marks)

*Use the information provided in Question 4a to answer this question.

4e. List and explain the important criteria that must be satisfied in order for information to be relevant for decision making. (6 marks)

Question 4 (25 marks) Each year, Macquarie Medical Centre (MMC) refers approximately 4,000 patients to a nearby laboratory for a standard blood test. The laboratory charges patients $180 for each test. MMC's financial director, Jane Wright, believes that MMC could profitably offer this service in-house. She carries out some investigations. Stephanie finds that the equipment needed to perform standard blood tests can be leased for $175,000 per year, but a full-time technician would have to be employed at an annual salary of $125,000; and additional space would have to be leased at an annual cost of $35,000. Jane estimates that the cost of performing each test (e.g., supplies, electricity, cleaning) is $55 per test. * Use the above information to answer Question 4a, 4b, 4c, 4d and 4e. Required: 4a. If MMC charges $180 per test, calculate the contribution margin per test and contribution margin ratio