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11 Edgerron Company is able to produce two products, and B, with the same machine in its factory. The following information is available. Product G
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Edgerron Company is able to produce two products, and B, with the same machine in its factory. The following information is available. Product G Product B Selling price per unit $ 60 $ 90 Variable costs per unit 15 54 Contribution margin per unit $ 45 $36 Machine hours to produce 1 unit 0.4 hours 1.0 hours Maximum unit sales per month 600 units 200 units N. The company presently operates the machine for a single eight-hour shift for 22 working days each month. Management is thinking about operating the machine for two shifts, which will increase its productivity by another eight hours per day for 22 days per month. This change would require $4,500 additional fixed costs per month. (Round hours per unit answers to 1 decimal place. Enter operating losses, if any, as negative values.) 3. If the company adds another shift, how many units of Product G and Product B should it produce? How much total incremental income would this mix produce each month? Should the company add the new shift? Product G Product B Total Hours dedicated to the production of each product Units produced for most profitable sales mix Contribution margin per unit Total contribution margin-two shifts Total incremental income Yes 4. Suppose the company determines that it can increase Product G's maximum sales to 700 units per month by spending $3,500 per month in marketing efforts. Should the company pursue this strategy and the double shift? Compute total incremental income, Product G Product B Total Second shift without marketing campaign: Units produced for most profitable sales mix Contribution margin per unit Contribution margin $ 0 $ 0 Second shift with marketing campaign: Units produced for most profitable sales mix Contribution margin per unit Contribution margin $ 0 $ 0 Step by Step Solution
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