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RESTRICTED INTERNAL USE ONLY (hospital supply: p. 1/2) H OSPITAL S UPPLY , I NC . Hospital Supply, Inc. produced hydraulic hoists that were used by hospitals to move bedridden patients. The costs of manufacturing and marketing hydraulic hoists at the company’s normal volume of 3,000 units per month are shown below. Costs per Unit for Hydraulic Hoists Unit manufacturing costs: Variable materials Variable labor Variable overhead Fixed overhead Total unit manufacturing costs $550 825 420 660 $2,455 Unit marketing costs: Variable Fixed Total unit marketing costs 275 770 1,045 Total unit costs $3,500 Questions The following questions refer only to the data given above. Unless otherwise stated, assume there is no connection among the situations described in the questions; treat each independently. Unless otherwise stated, assume a regular selling price of $4,350 per unit. Ignore income taxes and other costs not mentioned above or in the question itself. 1. What is the break-even volume in units, and in sales dollars? 2. Market research estimates that monthly volume could increase to 3,500 units, which is well within hoist production capacity limitations, if the price were cut from $4,350 to $3,850 per unit. Assuming the cost
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This note was uploaded on 05/19/2011 for the course IE 2 taught by Professor A during the Spring '11 term at University of the Philippines Diliman.

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