Hospital Supply, Inc., produces hydraulic hoists that are used by hospitals to move bedridden patients. The costs of manufacturing and marketing the hydraulic hoists at the companys normal volume of 3,000 units per month are shown below.

B1. What is the break-even volume in units of hoists?

B2. A proposal is received from an outside contractor who will make and ship 1,000 hydraulic hoist units per month directly to Hospital Supplys customers as orders are received from Hospital Supplys sales force. If the outside contract is accepted, Hospital Supply will reduce its production by 1,000 units; total sales will not be affected. If the outside contract is accepted, the variable marketing costs per unit will be cut by 20 percent for each of the 1,000 units produced by the contractor. Hospital Supply's fixed marketing costs will be unaffected. Hospital Supplys plant will operate at two thirds of its normal level, and total fixed manufacturing costs will be cut by 30 percent. If the outside contractor is paid $425 per unit, how much would Hospital Supplys cash income increase or decrease if the outside contract is accepted?

Costs per Unit for Hydraulic Hoists Unit manufacturing costs $100 Variable materials Variable labor 150 50 Variable overhead Fixed overhead 120 $420 Total unit manufacturing costs Unit marketing costs Variables 50 140 Fixed 190 Total unit marketing costs Total unit costs The regular selling price of a hoist is $740 per unit. Ignore income taxes and other costs that are not mentioned in the above exhibit or in a question itself