Hospital Supply Inc.
CASE ANALYSIS PRESENTED BY GROUP 1:
PAT R I C I A C O, A N D R H EA A R N U C O, RO B M I C L AT, S H I E N E L M UJA R
D E L A SA L E U N I V E RS I T Y - M BA

Background of the Case
Hospital Supply, Inc. produced hydraulic hoists that were used by hospitals to move bedridden patients. The cost of manufacturing and marketing hydraulic hoists at the company’s normal volume of 3,000 units per month are shown in Table 1:

Table 1: Cost per Unit for
Hydraulic Units
Unit manufacturing costs:
Variable materials
Variable labor
Variable overhead
Fixed overhead
Total unit manufacturing costs
Unit marketing costs:
Variable
Fixed overhead
Total unit marketing costs
Total unit costs

$550
$825
$420
$600
$2,455
$275
$770
$1,045
$3,500

Background of the Case
Selling price is $4,350 per unit, based on the company’s normal volume of 3000 units.

Problem Statement
Hospital Supply Inc. has an opportunity to increase its profits with the following course of actions: •Cutting the selling price.
•Accepting a contract offer from the federal government. •Entering a foreign market.
•Partnering with an outside contractor.

Objective
The objective of this case is to recommend which among the opportunities should Hospital
Supply Inc. take in order to become more profitable. Areas to Consider: Break-Even
Analysis
First, it is important to determine the breakeven volume based on the company’s current costs and selling price of its products.
The break-even volume can be expressed in number of units or revenue. It is calculated as follows: Areas to Consider : Break-Even
Analysis

− () =

Where:
Fixed costs = total fixed costs
(fixed cost per unit times normal volume)
Unit contribution margin = selling price – variable cost per unit

Areas to Consider : Break-Even
Analysis