Edgerron Company is able to produce two products, G 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

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.)

1. Determine the contribution margin per machine hour that each product generates Product G Contribution margin per unit $ 45.00 Machine hours per unit 0.4 Contribution margin per machine hour $ 112.50 Product G Maximum number of units to be sold 800 Hours required to produce maximum units Product B 38.00 1.0 S 38.00 Product B 200 Total 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 240 200 440 Units produced for most profitable sales mix 440 176 % Contribution margin per unit 45.00 $ 36.00 Total contribution margin-one shift 19.800 S 8,336 $ 28.136 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 240 1 12 352 Units produced for most profitable sales mix 800 112 Contribution margin per unit 45.00 $ 36.00 Total contribution margin-two shifts 27.000 $ 4,032 31.032 Total contribution margin-one shift 26.138 Change in contribution margin Total incremental income 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 Product B Total Second shift without marketing campaign: Units produced for most profitable sales mix Contribution margin per unit Contribution margin Additional fixed costs $ 700 45.00 31.500 $ $ 72% 36.00 2.592 $ 34,092 Second shift with marketing campaign: Units produced for most profitable sales mix Contribution margin per unit Contribution margin Additional fixed costs $ $ 70072 45.00 36.00 31,500 $ 2.592 $ 34.092 3.500 Incremental income