Question

With the population aging and patients who dread sitting in a sterile dental office. dentists are finding an opportunity in dental house calls. The Blende Dental Group has taken its service on the road in San Francisco and New York City. performing everything from routine exams and cleanings to root canals. Some patients are wealthy and prefer the personal service, whereas others are elderly homebounds who cannot get out to the dentist's office. Recreating a dental office in a home requires additional equipment, such as a portable X-ray machine that looks like a ray gun. sterile water tanks, a dental drill, lights, and a laptop. A portable X-ray machine alone costs $9,000. What types of fixed costs are associated with this service? Assuming fixed costs of adding this mobile service will increase by $17,000 and a desired contribution margin of 35 percent, determine the amount of sales necessary to break even on this increase in fixed costs to offer this additional service. What types of fixed costs are associated with this service? Select all that apply

A. Equipment
B. Salaries
c.. Insurance
D. Materials

Answer 1

The fixed costs associated with a mobile dental service include equipment, salaries, and insurance. To break even on an increase of $17,000 in fixed costs with a 35% contribution margin, sales of $48,571.43 are necessary.

Step-by-step explanation:

The types of fixed costs associated with a dental house call service such as the one provided by the Blende Dental Group include equipment, salaries, and insurance. Materials, in this context, are typically considered variable costs, as their use would vary according to the number of patients treated. To calculate the amount of sales necessary to break even on the increase in fixed costs (an additional $17,000) with a desired contribution margin of 35%, the following formula can be used: Break-Even Sales = Fixed Costs / Contribution Margin Ratio.

Using this formula, the break-even sales would be calculated as $17,000 / 0.35, which equals $48,571.43. This means the Blende Dental Group would need to achieve sales of $48,571.43 to break even on their additional service costs. This calculation is crucial for the business to understand its financial thresholds and to set appropriate pricing and sales targets.