Hospital Supply Case

Statement of the Problem

* How can Hospital Supply, Inc. maximize its profit given various scenarios?

* Will it be beneficial for the company if ever they accept federal government offer to supply 500 units of hydraulic hoists?

* If ever the company decide to enter on the foreign market, will the company benefited for it?

* Is it acceptable and beneficial if the company disposed their unsold inventory at a lower price?

* Will they accept contractor’s offer to produce at reduced manufacturing cost without considering the impact on its own plant output?

Objectives

To be able to determine how much to sell to achieve profit

To identify alternative choices that will provide optimal profit for Hospital Supply Inc. or minimize losses.

To determine if the following company’s actions are acceptable and can positively contribute to company’s growth:

* Increase Sales

* Increase Revenue Income

* Maximized production

* Reduce overhead cost without sacrificing quality

* Employ into contractual obligation

* Maintained company’s output

* Enter into contractual obligation

* Maximize net income revenue by employing in-direct labor intensive employee

Areas of Consideration/Assumptions

* To evaluate the pros & cons of the various offer

* If the offer is acceptable, will it be advantageous for the company?

-Financially

-For how long

Case Analysis Proper

Question 1. Compute the break even volume in units and sales

Total Fixed Costs = (Fixed Overhead Cost+ Fixed Marketing Cost) x (Normal Volume)

= ($660 + $770) x (3,000 units) = $4,290,000

Contribution Margin per unit = Selling Price – (Variable Materials Cost + Variable Labor Cost + Variable Overhead Cost + Variable Marketing Cost)

= $4,350 – ($825 + $420 + $275)

= $2,280

Break Even Volume = Total Fixed Costs / Contribution Margin per unit

= $4,290,000 / $2,280

= 1,882 units

Break Even Sales = Break Even Volume x...