Break Even Point= Fixed Cost/ Contribution per unit

Fixed Cost 4290000

Contribution Per Unit 2280
BE Volume 1881.579
BE Sales 8184868
Particulars Before Reduction After Reduction
Price 4350 3850
Quantity 3000 3500
Revenue 13050000 13475000
Variable Manufacturing Cost 5385000 6282500
Variable Marketing Costs 825000 962500
Contribution Margin 6840000 6230000
Fixed Manufacturing Cost 1980000 1980000
Fixed Marketing Costs 2310000 2310000
Inome 2550000 1940000

Since the income is decreasing it should not be done

 Without Govt With Govt
Impact Contract Regular Government
Revenue 17,400,000 15,225,000 1,420,000
Variable Manu cost -7,180,000 6,282,500 897,500
Variable marketing cost -1,100,000 962,500
Contribution margin 9,120,000 7,980,000 522,500
Fixed manu cost -1,980,000
Fixed marketing cost 2,310,000
Income 4,830,000

Conclusion: Rejected.
With Govt
Total
16,645,000
7,180,000
962,500
8,502,500
-1,980,000
2,310,000
4,212,500
Minimum Price = Var Manu Cost + Shipping Cost + Ordering Cost
2227
Total Price of Foreign Market = 2227*1000= 2227000

Recommendation: At this price per unit differential cost of 2227000 will be recovered.
It should be $275 per unit variable marketing costs

Recommendation: Any price in excessof the differential costs of selling the hoists will add to income. In general, the price
ome. In general, the price should exceed the sum of the differential marketing costs and the potential scrap proceeds, which are an op
proceeds, which are an oppurtunity cost of selling the hoists rather than scrapping them. This assumes, that sale obsolete hoists will n
sale obsolete hoists will not cut into sales of the current model.
Particulars Normal Contract (1000 Units)
Revenue 13050000 13050000
Var Manu Cost 5385000 3590000
Var Mark Cost 825000 770000
Contribution 6840000 8690000
Fixed Manu Cost 1980000 1386000
Fixed Mark Cost 2310000 2310000
Contractor Payment - x
Income 2550000 4994000

x= 4994000-2550000= 2444000/1000 = 2444 per unit

Conclusion: 2444 is the max price that can be paid hence 2475 shouldn't be accepted.
Particulars Normal 1000 Regular and 800 Modified
Regular IN Regular OUT Modified Total
Revenue 13050000 8700000 4350000 3960000 17010000
Var Manu Cost 5385000 3590000 2420000 6010000
Var Mark Cost 825000 550000 220000 440000 1210000
Contribution 6840000 4560000 4130000 1100000 9790000
Fixed Manu Cost 1980000 1980000
Fixed Mark Cost 2310000 2310000
Contractor Payment - x
Income 2550000 5500000

Conclusion: Max payment is 2950000, hence the proposal should be accepted at 2475.