POLICY:

MDS core and non-stock items will be competitively priced with our goal to be at or below the current competitor's price. "Competitive Prices" are defined as the prices charged by vendors who provide similar or identical products and comparable services to those provided by MDS. MDS also contracts with "Prime Vendors" for broad lines of non-stocked products (office and laboratory) which, in most cases, may be purchased for next business day delivery.

PROCEDURES:

1. MDS products are grouped by category and priced with a markup sufficient to cover operating expenses. Categories of products carry a minimum and maximum mark-up depending on general operating expenses and competitiveness.
2. The minimum mark-up percentage is re-calculated each quarter by dividing the total operating cost for the prior four fiscal quarters plus any necessary addition to operating reserves as required by the office of Auxiliary Operations Analysis instructions by the cost of goods sold. (e.g. $1,800,000/7,000,000. = 25.7%)
3. Core stock quantity one items are priced according to the following guidelines:
   a. Prices will be targeted to be at or below the competitor's price.
   b. The maximum margin cap is 99% of the core stock item cost.
   c. The minimum acceptable margin is calculated per procedure 2.
   d. Any core stock item that cannot carry the minimum mark-up will be evaluated for conversion to non-stock.
4. Non-stock quantity one items are priced to be at or below the competitor's price.
5. Core stock tiered (case/pallet) pricing will be calculated as a discount off quantity one pricing. Discounts will vary depending on margin available but the average mark-up will not fall below the minimum mark-up per procedure 2. (e.g. office copy paper is priced by the ream, case and pallet with the overall average mark-up at ~30%)
6. Some exceptions to this policy are made in the category of U.S. Postage Stamps and supplies and forms owned by customers which are managed by MDS. Postage stamps carry a lower than minimum mark-up and customer owned merchandise managed by MDS is addressed in IPP 203.

EXAMPLE OF CORE STOCK COMPETITIVE PRICING POLICY