Submitted by: Submitted by alyssacrews
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Category: Business and Industry
Date Submitted: 04/01/2015 10:40 AM
HOMEWORK – CASE #16-1
HOSPITAL SUPPLY, INC.
ACG6425
1. The break-even volume in units is 1882. The sales dollars is $8,186,700.
x = TFC / (UP-UVC)
x = 4,290,000 / (4350-2070) = 1882
TR = UP * x >> TR = 4350 (1882) = $8,186,700
2. I would not recommend the reduction of the selling price per unit from $4350 to $3850. Though sales would increase by $425,000, the variable costs would increase by $1,035,000 and the net income would decrease by $610,000.
| |Normal Volume |Increased Volume |
|Units |3000 |3500 |
|Selling Price |4350 |3850 |
| | | |
|Total Sales | $13,050,000 | $13,475,000 |
|Variable Costs | $6,210,000 | $7,245,000 |
|Contribution Margin | $6,840,000 | $6,230,000 |
|Fixed Cost | $4,290,000 | $4,290,000 |
|Net Income | $2,550,000 | $1,940,000 |
3. The impact on March’s income if accepting the government contract would result in a net income decrease by $535,000.
|Lost March Volume | |
|500 | |
| | |
|Selling Price | |
|4350 | |
|...