Assume that Snake River Eye Center needs to adjust the price on its adult eye ex
ID: 2710440 • Letter: A
Question
Assume that Snake River Eye Center needs to adjust the price on its adult eye exams. Here are the relevant data projections:
Variable Cost Per Exam
$25
Fixed Costs
$400,000
Estimated Adult Eye Exams
6,000
37.
Answer all parts of the question and please label your answers clearly.
a What price must be set for the adult eye exam to breakeven?(3 points)
b What price must be set to earn an annual profit of $100,000?(3 points)
Assume that Snake River Eye Center needs to adjust the price on its adult eye exams. Here are the relevant data projections:
Variable Cost Per Exam
$25
Fixed Costs
$400,000
Estimated Adult Eye Exams
6,000
Explanation / Answer
Answer:
So break even no. of eye exam = Fixed cost / (X-25)
=> $400,000/ (X-25) = 6,000
=> X-25 = 66.67 => X = $91.67 (ans)
b)
Let Price to be set to earn annual profit of $100,000 = X
Now:
No. of eye exams = (Fixed cost+Target Profit) / (X-25)
=> $(400,000+100,000)/ (X-25) = 6,000
=> X = 108.33 (ans)
In$ Let the price per eye exam X Variable cost 25 Contribution per eye exam (X-25) No of Eye Exam 6000Related Questions
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