Edgerron Company is able to produce two products, G and B, with the same machine in its factory. The following information is available. Product B $ 160 Seling price per unit Variable costs per unit Contribution margin per unit Machine hours to produce 1 unit Maximum unit sales per month Pracuct G $ 132 50 $ 82 0.4 hours 600 units S 64 1.0 hours 150 units The company presently operates the machine for a single eight-hour shift for 22 working days each month. Management is thinking about aperating the machine for twa shifts, which will increase its productivity by another eight hours per day for 22 days per month. This change would require $8.000 additional fixed costs per month. (Round hours per unit answers to 1 decimal place. Enter operating losses, if any, as negative values.) 1. Determine the contribution margin per machine hour that each product generates Product G Contribution margin per unil S 82.0a Machine hours per unil 0.48 Contribution margin per machine rour s 205.00 Product G Maximum number of units to be sold eca Hours required to produce maximum unils 240 Product B $ 64.00 1.0 $ 64.00 Product B 150 150 Total 390 2. How many units of Product G and Product B should the company produce if it contnues to operate with only one shift? How much total contribution margin does this mix produce each month? Product G Product B Total Hours dedicated to the production of each product 176 Unils produced for manipulilable sales mix Contribution margin par unil S S 82.ca $ 0.00 31, 980S Total contribution margin-one shift 3. If the company adds another shift, has many unils al Product G and Product B should it produce? How much latel Incremental income would this mix produce each month? Should the company add the new shift? Product Product B Total Hours dedicated to the production of each product 240 112 Units produced for most profitablo sales mix 800 112 Conlibulicin mergine per unil 5 22.00 $ 64.00 Tolal conlritulicin argin-wu Shis 5 4 9.260 $ 7,185 S 58.va Tolal counlritulicin margin-cres Chance in contribution margin Change in fxed costs Change in operating income.css) Tolal incremental com Should the rempany add another shift? Yes 4. Suppose the company dete mines that it can increase Product C's maximum eales to 700 units per month by spending $7.000 per month in marketing efforts. Should the company pursue this strategy and the couble shift? Comoute total Incremental income. Product Product B Total Second shift without marketing campaign. Units produced for most profitable sales mix Contribulum urgin per unil Contribution margin Arditical fixed costs Incremental income Second shift with marketing campaign. Units produced for most profitable sales mix s S Contribulinn margin per unil Contribution margin Additional fixed costs Additional marketing costs Incremental income Chance in incremental income Should the company pursuc this strategy and the double shift? S No
