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Hospital supply 1 Fixed Costs per unit mftg per unit mktg Total Contribution per unit Selling

price Variable cost Monthly volume Total contribution-current BEP units BEP sales Total fixed cost 1980000 2310000

660 770 4290000

4350 2070 2280 3000 6840000 1881.578947 $8,184,868.42

2 Revised selling price Variable cost Revised contribution Monthly volume Total contribution -revised Difference in Income 3

3850 2070 1780 3500 6230000 -610000 without govt Contract

Decrease in profit Increase in profit Net decrease

with Regular

Revenue Variable mftg Variable mktg Contribution

17400000 7180000 1100000 9120000

15225000 6282500 962500 7980000

Fixed mftg Fixed mktg Income Alternate approach Contribution on 500 units

1980000 2310000 4830000 1140000

4 Minimum price on foreign order Per Unit Variable Mftg costs Shipping costs Marketing cost PU Minimum unit price 5 Minimum price on obsolete model Variable Mktg costs 6 Proposal of the Contractor

1795 410 22 2227

on 1000 units 1795000 410000 22000 2227000

275

All Inhouse Production Total variable manufacturing costs Total variable marketing costs Total fixed manufacturing costs Total fixed marketing costs Total costs Cost per unit Relevant cost approach Per Unit

5385000 825000 1980000 2310000 10500000

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 Do not accept the sub contract offer as the price is higher 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 Accept the sub contract offer as the price is lower Contribution on modified Sale price 4950 Variable Mftg costs 3025 Variable Mktg costs 550 Contribution on modified 1375

fixed cost

ease in profit ase in profit

1500000 890000 610000 1780

Govt contract Govt. 1420000 897500 Total 16645000 7180000 962500 8502500

Diff

-755000 0 137500 -617500

522500

1980000 2310000 4212500 Share of Fixed cost 247500 Profit 275000 Contribution on 500522500

0 0 -617500

-617500

Subcontract 1000 units

Difference Saving in inhouse cost

3590000 770000 1386000 2310000 8056000

1795000 55000 594000 0 2444000 2444