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			$	110				$	140
Variable costs per unit				40					84
Contribution margin per unit			$	70				$	56
Machine hours to produce 1 unit		0.4	hours				1.0	hours
Maximum unit sales per month		500	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 $7,000 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 Product B 70.00 Contribution margin per unit 56.00 Machine hours per unit 1.0 0.4 Contribution margin per machine hour 175.00 56.00 Product B Total Product G Maximum number of units to be sold 500 250 Hours required to produce maximum units 200 250 450 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 B Product G Total 176 Hours dedicated to the production of each product 176 440 Units produced for most profitable sales mix 70.00 0.00 Contribution margin per unit 30,800 Total contribution margin - one shift 30,800 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 B Product G Total 200 Hours dedicated to the production of each product 152 352 500 152 Units produced for most profitable sales mix Contribution margin per unit 70.00 56.00 Total contribution margin - two shifts 43,512 35,000 8,512 Total contribution margin - one shift 30,800 7,000 Change in contribution margin Change in fixed costs Total incremental income 4. Suppose the company determines that it can increase Product G's maximum sales to 600 units per month by spending $6,000 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 600 112 Contribution margin per unit 70.00 56.00 Contribution margin 48,272 7,000 6,000 6,272 $ 42,000 Additional fixed costs Incremental income Second shift with marketing campaign: Units produced for most profitable sales mix Contribution margin per unit Contribution margin