Question

27. Group purchasing organizations: pricing. Given the data in Exhibit 10.14 and retaining the same items and volumes, if Vendors A and B vowed to match Vendor C's prices, which vendor would be least expensive for Mumford Regional Hospital?

Answer 1

Vendor C will be the least expensive as its variable cost is lower than $12000 from vendor A and around $10930 from vendor B although its fixed cost is higher than both but if sale increases fixed cost of vendor B will increases that's why it will be more expensive and on the other hand when if compare vendor A has a fixed cost 25000$ which is less than 5000$ lesser than vendor C therefore loss increases by 5000 $ but vendor c has 12000$ saving I variable cost this result in overall saving of 7000 when we chose vendor C that's why its least expensive.