During 2020, Seth Britain Lab supplied hospitals with a comprehensive diagnostic kit for $120. At a volume of 80,000 kits, Seth had fixed costs of $1,000,000 and a profit before income taxes of $200,000. Due to an adverse legal decision, Seth's 2021 liability insurance increased by $1,200,000 over 2020. Assuming the volume and other costs are unchanged, what should the 2021 price be if Seth is to make the same $200,000 profit before income taxes?

During 2020, Seth Britain Lab supplied hospitals with a comprehensive diagnostic kit for $120. At a volume of 80,000 kits, Seth had fixed costs of $1,000,000 and a profit before income taxes of $200,000. Due to an adverse legal decision, Seth's 2021 liability insurance increased by $1,200,000 over 2020. Assuming the volume and other costs are unchanged, what should the 2021 price be if Seth is to make the same $200,000 profit before income taxes?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter17: Advanced Issues In Revenue Recognition

Section: Chapter Questions

Problem 6MC

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