Hospital Hoists, Inc. produces hydraulic hoists used by hospitals to move bed ridden patients. The costs of manufacturing and marketing hydraulic hoists at the company’s normal demand of 3,000 units per month are shown in the following table.

Cost per Unit for Hydraulic Hoists
Unit manufacturing costs:
Variable materials	$ 550
Variable labor	825
Variable overhead	420
Total unit manufacturing cost:		$ 1,795
Unit variable marketing costs	$ 275
Total unit variable costs		$ 2,070
Total fixed costs		$4,290,000

Hospital Hoists, Inc. is not producing at full capacity.  You were asked to:

1. Prepare an influence diagram leading up to your profit.

2. If you charge $ 4,350 per unit, what is the monthly breakeven point? (That is, how many units must Hospital Hoists sell to breakeven?)

• Define the random variable X.
• Express Total Revenue, Fixed Cost, Variable Cost, and Profit in terms of X.
• Calculate the breakeven point.
• Draw two graphs:
  • Revenue and Total Cost vs. Units Sold.
  • Profit vs. Units Sold.
• Market research estimates that the monthly volume could be increased to 3,500, which is well within hoist production capacity limitations, if the price were cut from $4,350 to $3,850 per unit. Assuming the cost behavior patterns in the table are correct, would you recommend the action be taken? What is the impact on monthly sales, costs, and profit?