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 | | | $ | 200 | | | | $ | 230 | | |
| Variable costs per unit | | | | 85 | | | | | 138 | | |
| Contribution margin per unit | | | $ | 115 | | | | $ | 92 | | |
| Machine hours to produce 1 unit | | 0.4 | hours | | | 1.0 | hours | | |
| Maximum unit sales per month | | 650 | units | | | 250 | 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 $11,500 additional fixed costs per month. (Round hours per unit answers to 1 decimal place. Enter operating losses, if any, as negative values.)
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 $ 200 Selling price per unit Variable costs per unit Contribution margin per unit Machine hours to produce 1 unit Maximum unit sales per month Product B $ 230 138 $ 92 1.0 hours 250 units 0.4 hours 650 units The company presently operates the machine for a single elght-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 elght hours per day for 22 days per month. This change would require $11,500 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 G Contribution margin per unit S 115.00 Machine hours per unit 0 0.4 Contribution margin per machine hour 287.50 Product Maximum number of units to be sold 650 Hours required to produce maximum units 1,625 x $ 287 50 Product B $ 92.00 1.0 $ 92.00 Product B 250 250 Total 1.875 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 Units produced for most profitable sales mix Contribution margin per unit 0.00 Total contribution margin-one shift 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 G Product B Total Hours dedicated to the production of each product 1,625 $ 250 1,875 Units produced for most profitable sales mix 650 250 % Contribution margin per unit 115.00 $ 92.00 Total contribution margin-two shifts $ 74,750 $ 23,000 S 97,750 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 G Product B Total Hours dedicated to the production of each product 1,625 % 250 1.875 Units produced for most profitable sales mix 650 250 % Contribution margin per unit 115.00 $ 92.00 Total contribution margin-two shifts IS 74,750 $ 23,000 S 97,750 % Total contribution margin-one shift 11,500 Change in operating income(loss) 4. Suppose that the company determines that it can increase Product G's maximum sales to 700 units per month by spending $10,500 per month in marketing efforts. Should the company pursue this strategy and the double 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 and marketing campaign
