Question

Allied Laboratories is combing some of its most common tests into one-price packages. One such package will contain three tests that have the following variable costs:

	Test A	Test B	Test C
Disposable Syringe	$4.00	$4.00	$4.00
Blood Vial	$0.50	$0.50	$0.50
Forms	$0.15	$0.15	$0.15
Reagents	$0.80	$0.60	$1.20
Sterile Bandages	$0.20	$0.20	$0.20
Breakage/losses	$0.05	$0.05	$0.05

When the tests are combined, only one syringe, form, and sterile bandage will be used. Furthermore, only one charge for breakage/losses will apply. Two blood vials are required, and reagent costs will remain the same (reagents from all three tests are required – so add up those costs).

Assuming marginal cost pricing, what is the cost of the combined test?

Select one or more:

a. $6.90

b. $3.00

c. $8.00

d. $4.50

Allied Laboratories is combing some of its most common tests into one-price packages. One such package will contain three tests that have the following variable costs:

	Test A	Test B	Test C
Disposable Syringe	$4.00	$4.00	$4.00
Blood Vial	$0.50	$0.50	$0.50
Forms	$0.15	$0.15	$0.15
Reagents	$0.80	$0.60	$1.20
Sterile Bandages	$0.20	$0.20	$0.20
Breakage/losses	$0.05	$0.05	$0.05

When the tests are combined, only one syringe, form, and sterile bandage will be used. Furthermore, only one charge for breakage/losses will apply. Two blood vials are required, and reagent costs will remain the same (reagents from all three tests are required – so add up those costs).

What price must be charge to achieve a contribution margin of $10?

Select one or more:

a. $19.80

b. $14.75

c. $18.00

d. $8.25

Allied Laboratories is combing some of its most common tests into one-price packages. One such package will contain three tests that have the following variable costs:

	Test A	Test B	Test C
Disposable Syringe	$4.00	$4.00	$4.00
Blood Vial	$0.50	$0.50	$0.50
Forms	$0.15	$0.15	$0.15
Reagents	$0.80	$0.60	$1.20
Sterile Bandages	$0.20	$0.20	$0.20
Breakage/losses	$0.05	$0.05	$0.05

When the tests are combined, only one syringe, form, and sterile bandage will be used. Furthermore, only one charge for breakage/losses will apply. Two blood vials are required, and reagent costs will remain the same (reagents from all three tests are required – so add up those costs).

Allied estimates that 2,000 of the combined tests will be conducted during the first year. The annual allocation of direct fixed and overhead costs totals $50,000. What price must be set to cover the total overhead costs at the projected volume.

What price must be charged to cover full costs?

Select one or more:

a. $27.50

b. $43.75

c. $33.00

d. $26.90

Allied Laboratories is combing some of its most common tests into one-price packages. One such package will contain three tests that have the following variable costs:

	Test A	Test B	Test C
Disposable Syringe	$4.00	$4.00	$4.00
Blood Vial	$0.50	$0.50	$0.50
Forms	$0.15	$0.15	$0.15
Reagents	$0.80	$0.60	$1.20
Sterile Bandages	$0.20	$0.20	$0.20
Breakage/losses	$0.05	$0.05	$0.05

When the tests are combined, only one syringe, form, and sterile bandage will be used. Furthermore, only one charge for breakage/losses will apply. Two blood vials are required, and reagent costs will remain the same (reagents from all three tests are required – so add up those costs).

Allied estimates that 2,000 of the combined tests will be conducted during the first year. The annual allocation of direct fixed and overhead costs totals $50,000. What price must be set to cover the total overhead costs at the projected volume.

What price must be charged to cover full costs plus a $25,000 profit?

Select one or more:

a. $31.00

b. $45.50

c. $22.54

d. $50.00

Answer 1

Cost of the combined test = Syringe + 2*Blood Vial + form + reagents + bandage + breakage

= 4+2*0.5+0.15+0.8+0.6+1.2+0.2+0.05

= $8

i.e. C

Price to be charged to achieve a contribution margin of $10 = Variable cost per test + desired contribution margin per test

= $8+$10

= $18

i.e. C

Fixed Cost per test = 50,000/2,000 = $25

Price to be charged to cover total cost = Variable Cost per test + Fixed cost per test

= $8+$25

= $33

i.e. C

Profit per test = 25,000/2,000 = $12.5

Price to be charged = Total Cost + Profit per test

= 33+12.5

= $45.5

i.e. b