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 $8,000. Refer to Appendix 2: Marketing by the Numbers to answer the following questions. 9.12 What types of fixed costs are associated with this service? Estimate the total fixed costs for this additional service, and, assuming a contribution margin of 40 percent, determine the amount of sales necessary to break even on this increase in fixed costs to offer this additional service.

HINT:You will need to estimate the cost of those items you consider fixed costs so answers will vary. Please show your formulas and calculation.

Answer 1

Answer might vary depending on fixed cost estimate taken

The contribution margin is used to recover the fixed cost and sales level needed to break even on dental house calls.