Hospital Supply, Inc.

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G R O U P C A S E 3: H O S P I T A L S U P P L Y, I N C Given Information: Hospital Supply, Inc.’s Normal Volume (in units per month) | 3,000 | Regular Selling Price (per unit) | 4,350 | Costs 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 | |
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Shipping costs for this order will amount to $410 per unit, while total costs of obtaining the contract (marketing costs) will be $22,000. Domestic business would be unaffected by this order. What is the minimum unit price Hospital Supply should consider for this order of 1,000 units? Explain and show the basis of your answer.

Order Quantity | 1,000 | Variable Manufacturing Costs | $1,795 | Shipping Costs (per unit) | 410 | Marketing Costs (total) | 22,000 | Marketing Costs (per unit) | 22 | Minimum Unit Price | $2,227 | The minimum unit price charged for the order of 1,000 units is $2,227. From the table above, this is obtained by summing the variable costs used in manufacturing the hoists, shipping costs and marketing costs, all in per unit basis. 5) An inventory of 200 units of an obsolete model of the hoist remains in the stockroom. These must be sold through regular channels at reduced prices or the inventory will soon be valueless. What is the minimum price that would be acceptable in selling these units? Explain and show the basis of your answer. Since the manufacturing costs are already considered sunk costs, the remaining costs that will be incurred are the variable marketing costs because it was indicated that the 200 units will be sold through

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