Hospital supply

1 Fixed Costs Total fixed cost

per unit mftg 660 1980000
per unit mktg 770 2310000
Total 4290000

Contribution per unit

Selling price 4350
Variable cost 2070
2280
Monthly volume 3000
Total contribution-current 6840000

BEP units 1881.57894736842

BEP sales $8,184,868.42

2 Revised selling price 3850 Decrease in profit

Variable cost 2070 Increase in profit
Revised contribution 1780 Net decrease
Monthly volume 3500
Total contribution -revised 6230000

Difference in Income -610000

3 without govt with

Contract
Regular

Revenue 17400000 15225000

Variable mftg 7180000 6282500

Variable mktg 1100000 962500

Contribution 9120000 7980000

Fixed mftg 1980000

Fixed mktg 2310000
 Income 4830000

Alternate approach
Contribution on 500 units 1140000

See below for third approach

4 Minimum price on foreign order
Per Unit on 1000 units
Variable Mftg costs 1795 1795000
Shipping costs 410 410000
Marketing cost PU 22 22000
Minimum unit price 2227 2227000

5 Minimum price on obsolete model

Variable Mktg costs 275

6 Proposal of the Contractor

All Inhouse

Production
Cost for 3000units
Total variable manufacturing costs 5385000
Total variable marketing costs 825000
Total fixed manufacturing costs 1980000
Total fixed marketing costs 2310000

Total costs 10500000

Cost per unit

Relevant cost approach Per Unit on 1000 units

Variable Mftg costs 1795 1795000
Saving in Mktg costs 55 55000
Saving in fixed costs 594 594000
Maximum price offer 2444 2444000
7 Relevant cost approach Per Unit on 1000 units
Variable Mftg costs 1795 1795000
Saving in Mktg costs 55 55000
Contribution on modified 1100 1100000
Maximum price offer 2950 2950000

Contribution on modified
Sale price 4950
Variable Mftg costs 3025
Variable Mktg costs 550
Contribution on modified 1375

Incremental profit per unit 475

Incremental profit on 1000 units 475000
 1500000
890000
610000

Govt contract Diff

Govt. Total

1420000 16645000 -755000

897500 7180000 0
962500 137500

522500 8502500 -617500

1980000 0
2310000 0
 4212500 -617500

Share of Fixed cost 247500

Profit 275000
Contribution on 500 522500 -617500

Subcontract Difference
Saving in inhouse
1000 units cost
Cost for 2000units for 1000 units
3590000 1795000
770000 55000
1386000 594000
2310000 0

8056000 2444000
2444