0 Retest 2 800 A retest is the laboratorys code for a high p

0 Retest 2 800 A retest is the laboratory\'s code for a high protle case This might be a best of a tamous athlete andlor a test that might be challenged in court. The laboratory does extra work and uses drug tests Limitless Labs is subject to a 40 pencent tax rate Vanable costs include the labor costs of the medic al technicians at the lab Fixed costs of $390 ,000 per year include building and equipment costs and the costs of adminestranion A basc \"unr is a outine drug test a

Solution

a). Calculation of Earn after tax :-

b).Break even Revenue :-

Weighted average contribution margin :-

Weighted Average Revenue = (0.85*$500) + (0.1*$800) + (0.05*$4000)

= $425 + $80 + $200

= $705

Weighted Average Contribution = (0.85*$380) + (0.1*$400) + (0.05*1200)

= $323 + $40 + $60

= $423

Weighted Average Contribution % = $423 / $705

= 0.60 or 60%

Break Even Revenue = Fixed Cost / Weighted average Contribution %

= $390000 / 0.60

= $650000

c). Income After Tax = $180000 (amount is not show clarelly)

Income before tax = $180000 / (1-0.40)

= $180000 / 0.60

= $300000

Calculation of Revenue at profit $300000:-

= (Fixed Cost + Profit) / Weight average Contribution %

= ($390000 + $300000) / 0.6

= $690000 / 0.6

= $1150000

Particulars	Basic	Retest	Vital	Total
Sales Price per unit	$500	$800	$4000
Less : Vaireble Cost	($120)	($400)	($2800)
Contribution per unit	$380	$400	$1200
Contribution (Sale unit * Contribution per unit)	$323000	$40000	$60000	$423000
Less : Fixed Cost				($390000)
Operating Income				$33000
Less : Tax (40%)				($13200)
Operating Income(Earn) after tax				$19800