Hospital Supply

Break-even volume: total costs equal total revenue.

X = break-even volume

UP (unit price) * break-even volume = fixed costs + (variable costs * X)

x = 770 + (275 * x)

0

Revenue = unite price * x

Cost = revenue at break-even volume

Total fixed cost = (660 + 770) * 3,000 = 4,290,000

Contribution margin per unit = unit price – unit variable cost = 4,350 – 2,070 = 2280

Dollar change for revenue = $425,000

Dollar change for costs (Variable cost) = $1,035,000

Dollar change for income = -$610,000

Unit 3,000, selling price 4,350 = 13,050,000

Variable cost: 2,070 * 3,000 = 6,210,000

Contribution margin = 2,280 * 3,000 = 6,840,000

Fixed cost = 1,430 * 3,000 = 4,290,000

Net income = 2,550,000

Now 3,500, selling price 3,850 = 13,475,000

Variable cost: 2,070 * 3,500 = 7,245,000

Contribution margin = 1,780 * 3,500 = 6,230,000

Fixed cost = 4,290,000

Net income = 1,940,000

If 1000 units were made outside:

Revenue = 3000 * 4350 = 13050000

Variable Marketing cost = 220 * 1000 + 275 * 2000 = 770000

Fixed marketing cost = 770 * 3000 = 2310000

Variable manufacturing = 1795 * 2000 = 3590000

Fixed manufacturing = 1386000

Net income that will be made if 1000 unit was made outside = 4994000

If paying 2475 per unit for 1000 = 2475000

4994000 – 2475000 = 2519000; Hospital supply makes less than its original make

1) 4,290,000/2,280 = 1,882 units

2)

Dollar change for revenue = $425,000

Dollar change for costs (Variable cost) = $1,035,000

Dollar change for income = -$610,000

3)

Contribution margin per unit = unit price – unit variable cost = 4,350 – 2,070 = 2280

Loss contribution margin = 2,280 * 500 = 1,140,000

Need to find manufactured cost for selling 500 units to the government to find out how much the government will reimburse.

Total fixed cost at full capacity (no marketing costs) = 660 * 3,000 = 1,980,000

Fixed cost per unit = 1,980,000 / 4,000 = 495

Manufacturing cost per 500 unit = 495 * 500 = 247,500...