46133530-Hospital-Supply-Inc

46133530-Hospital-Supply-Inc - Hospital Supply, Inc 1 von 3

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Case 6-1: Hospital Supply, Inc. A. Introduction This case consists examining various options of behavioral of costs in order to maximize profits. Hospital Supply, Inc. manufactures hydraulic hoists and has a normal volume of 3,000 units per month. A break-even analysis is used to determine the sales volume and prices at which the company would profitably sell its product. Also, a number of scenarios are given in order to determine which options to take to maximize profit or at least minimize loss. B. Analysis Question 1: According to exhibit 1 on page 500 in textbook variable costs per unit = $550 + $825 + $420 + $275 = $ 2,070 and fixed costs per unit = $660 + $770 = $1,430. Normal volume = 3,000 units and regular selling price = $4,350 Total fixed cost = 3,000 units *$1,430/unit = $4,290,000 Unit contribution = price/unit – variable cost/unit = $4,350 - $2,070 = $2,280 Contribution percent = $2,280/$4,350 = 0.524138 Question 2: | |Regular price |With price reduction |Difference | | | | |After - before | |Quantity (units) |3,000 |3,500 |500 | |Price ($) |4,350 |3,850 |-500 | |Revenue $ (P x Q) |13,050,000 |13,475,000 |425,000 | |Fixed costs |4,290,000 |4,290,000 |0 | |Variable costs |6,210,000 |7,245,000 |1,035,000 | |Total costs (FC+VC) |10,500,000 |11,535,000 | | Income (with regular price) = Revenues –Total costs = $13,050,000 - $10,500,000 = $2,550,000 After price reduction, income = $13,475,000-$11,535,000 = $1,940,000 Question 3: If government contract is accepted: income from government = 500 x unit contribution
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This note was uploaded on 12/07/2011 for the course MBA 0001 taught by Professor Akshat during the Spring '09 term at Institute of Management Technology.

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46133530-Hospital-Supply-Inc - Hospital Supply, Inc 1 von 3

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