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.)

1. Determine the contribution margin per machine hour that each product generates. Product G Product B Contribution margin per unit $ 115.00$ 92.00 Machine hours per unit 0.41 1.0 Contribution margin per machine hour $ 287.50 $ 92.00 Product G Product B Maximum number of units to be sold 650 250 Hours required to produce maximum units 260 250 Total 510 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 G Product B Total Hours dedicated to the production of each product 176 176 Units produced for most profitable sales mix 4400 Contribution margin per unit $ 115.00 $ 0.00 Total contribution margin-one shift $ 50,600 $ 50,600 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 260 92 352 Units produced for most profitable sales mix 650 92 Contribution margin per unit 115.00 $ 92.00 Total contribution margin-two shifts $ 74,750 $ 8,464 $ 83,214 Total contribution margin-one shift 50,600 Change in contribution margin 32,614 Change in fixed costs 11,500 Change in operating income(loss) $ 21,114 Total incremental income Should the company add another shift? Yes 4. Suppose 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? Compute total incremental income. Product Product B Total Second shift without marketing campaign: Units produced for most profitable sales mix 7001 72 Contribution margin per unit 115.00 $ 92.00 Contribution margin $ 80,500 $ 6,624 $ 87,124 Additional fixed costs $ 11,500 Incremental income $ 11,500 $ 2801 115.00 32,200 $ $ $ 2 Second shift with marketing campaign: Units produced for most profitable sales mix Contribution margin per unit Contribution margin Additional fixed costs Additional marketing costs Incremental income Change in incremental income Should the company pursue this strategy and the double shift? zol 92.00 6,624 $ | $ $ 87,124 11,500 10,500 500 100 No