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DrBertin Performs a Certain Routine Surgical Procedure at Her Medical

question 77

Essay

Dr.Bertin performs a certain routine surgical procedure at her medical clinic.Her monthly fixed operating costs are $12,000,while her after-tax operating income is $8,000 when she performs 200 such procedures in a month.Dr.Bertin's before-tax operating income is subject to a marginal tax rate of 60%.
Required:
a)What is the margin of safety percentage for Dr.Bertin,assuming she performs 200 procedures?
b)What is the degree of operating leverage for Dr.Bertin,again assuming she performs 200 procedures?


Definitions:

CCA Class

Stands for Capital Cost Allowance Class, a categorization in Canadian tax law used to determine the depreciation rate for tax purposes on tangible capital assets.

Book Value

The net value of a company's assets, minus its liabilities and intangible assets, as recorded on the balance sheet.

Depreciated

Describes the reduction in value of an asset over time, often due to wear and tear or obsolescence.

Current

Pertaining to the present time or most recent; also refers to assets and liabilities expected to be used or paid within a year.

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