Hospital Supply Case
Hospital Supply Inc.: A quantitative analysis
I. Introduction: Hospital Supply,Inc.,produced hydraulic hoists that were used by hospitals to move bedridden patients. The costs of manufacturing and marketing hydraulic hoists at the company’s normal volume of 3,000 units per month are shown in Exhibit 1.
EXHIBIT 1: Cost per unit for hydraulic hoists
Unit manufacturing costs:
Variable materials $550
Variable labor 825
Variable overhead 420
Fixed overhead 660
Total unit manufacturing costs $2,455
Unit marketing costs:
Variable 275
Fixed 770
Total unit marketing costs 1,045
Total unit costs $3,500
II. Statement of the Problem: How can Hospital Supply Inc. maximize its profit given various scenarios?
III. Objectives: 1. To be able to determine how much to sell to achieve profit 2. To identify alternative choices that will provide optimal profit for Hospital Supply Inc. or minimize losses
IV. Scenarios
1. Mark down price of hydraulic hoist per unit from $4,350 to $3,850 assuming that the market estimates a monthly volume increase of 3, 500 units per.
|ADVANTAGES |DISADVANTAGES |
|Lower prices increase consumers demand |Lower prices reduce incomes |
|Increase in market share |Reduction in product availability |
2. Accept government contract
|ADVANTAGES |DISADVANTAGES |
|Invariable orders
I. Introduction: Hospital Supply,Inc.,produced hydraulic hoists that were used by hospitals to move bedridden patients. The costs of manufacturing and marketing hydraulic hoists at the company’s normal volume of 3,000 units per month are shown in Exhibit 1.
EXHIBIT 1: Cost per unit for hydraulic hoists
Unit manufacturing costs:
Variable materials $550
Variable labor 825
Variable overhead 420
Fixed overhead 660
Total unit manufacturing costs $2,455
Unit marketing costs:
Variable 275
Fixed 770
Total unit marketing costs 1,045
Total unit costs $3,500
II. Statement of the Problem: How can Hospital Supply Inc. maximize its profit given various scenarios?
III. Objectives: 1. To be able to determine how much to sell to achieve profit 2. To identify alternative choices that will provide optimal profit for Hospital Supply Inc. or minimize losses
IV. Scenarios
1. Mark down price of hydraulic hoist per unit from $4,350 to $3,850 assuming that the market estimates a monthly volume increase of 3, 500 units per.
|ADVANTAGES |DISADVANTAGES |
|Lower prices increase consumers demand |Lower prices reduce incomes |
|Increase in market share |Reduction in product availability |
2. Accept government contract
|ADVANTAGES |DISADVANTAGES |
|Invariable orders