AULUIH Lo question Edgerron Company is able to produce two products, G and B. with the same machine in its factory. The following information is available. Product $ 140 55 Selling price per unit Variable costs per unit Contribution margin per unit Machine hours to produce 1 unit Maximum unit sales per month $ 85 Product B $ 170 102 $ 68 1.0 hours 200 units 0.4 hours 500 units 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 $8,500 additional fixed costs per month. (Round hours per unit answers to 1 decimal place. Enter operating losses, if any, as negative values.) Answer is not complete. 1. Determine the contribution margin per machine hour that each product generates Product Product B $ 68.00 Contribution margin per unit Machine hours per unit Contribution margin per machine hour 1.0 85.00 0.4 212.50 Product 500 $ 68.00 Product B 200 Total Maximum number of units to be sold Product B Total Product G 500 200 Maximum number of units to be sold Hours required to produce maximum units 200 200 400 176 2. How many units of Product G and Product B should the company produce if it continues to operate with only one shift? How much total contribution margin does this mix produce each month? Product Product B Total Hours dedicated to the production of each product 176 Units produced for most profitable sales mix 440 Contribution margin per unit $ 212.50 Total contribution margin-one shift 93,500 $ 93,500 3. If the company adds another shift, how many units of Product G and Product B should it produce? How much total contribution margin would this mix produce each month? Product Product B Total Hours dedicated to the production of each product Units produced for most profitable sales mix 200 152 Contribution margin per unit 85.00 $ 68.00 Total contribution margin-two shifts 17,000 $ 10,336 $ 116,586 Total contribution margin-one shift 93,500 Change in contribution margin 23,086 % Change in fixed costs 8,500 17,000 $ 10,336 S Total contribution margin-two shifts Total contribution margin-one shift Change in contribution margin Change in fixed costs Change in operating income(loss) Should the company add another shift? 116,586 93,500 23,086 8,500 14,586 $ Ves 4. Suppose that the company determines that it can increase Product G's maximum sales to 600 units per month by spending $7,500 per month in marketing efforts. Should the company pursue this strategy and the double shift? Product Product B Total Hours dedicated to the production of each product Units produced for most profitable sales mix 240 112 Contribution margin per unit 85.00 $ 68.00 Total contribution margin-two shifts and marketing campaign 20,400 $ 7,616 $ 135,116 Contribution margin-two shifts without marketing campaign 116,586 Change in contribution margin 18,530 Additional marketing costs 7,500 Change in fixed costs 8,500 Change in operating income(loss) 2,530 Should the company pursue the marketing campaign? s No Prev 1 of 1 Next >