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HELP WITH NUMBER 3 TOTAL INCREMENTAL INCOME I cannot figure out what the answer is Edgerron Company is able to produce two products, G and

HELP WITH NUMBER 3 TOTAL INCREMENTAL INCOME I cannot figure out what the answer is

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Edgerron Company is able to produce two products, G and B, with the same machine in its factory. The following information is available Selling price per unit Variable costs per unit Contribution margin per unit Machine hours to produce 1 unit Maximum unit sales per month Product G $ 210 90 $ 120 0.4 hours 650 units Product B $ 240 144 $ 96 1.0 hours 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 $12,000 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 Contribution margin per unit $ 120.00 $ 96.00 Machine hours per unit 0.4 1.0 Contribution margin per machine hour $ 300.00 $ 96.00 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 mamin does this mix nondure Aarh month? 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 Contribution margin per unit $ 120.00 440 Total contribution margin-one shift $ 52,800 $ 52 800 650 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 92 Contribution margin per unit $ 120.00 $ 96.00 Total contribution margin-two shifts $ 78,000 $ 8,832 $ 86,832 Total contribution margin-one shift 52.800 Change in contribution margin 34 032 Change in fixed costs 12,000 Change in operating income(loss) $ 22,032 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 $11,000 per month in marketing efforts. Should the company pursue this strategy and the double shift? Compute total 4. Suppose the company determines that it can increase Product G's maximum sales to 700 units per month by spending $11,000 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 650 92 Contribution margin per unit $ 120.00 $ 96.00 Contribution margin $ 78,000 $ 8,832 $ 86,832 Additional fixed costs $ 12,000 Incremental income $ 74,832 Second shift with marketing campaign Units produced for most profitable sales mix Contribution margin per unit Contribution margin 700 72 $ 120.00 S 96.00 $ 84,000 $ 6,912 $ Additional fixed costs $ Additional marketing costs Incremental income 90 912 12,000 11,000 67,912 S $ Change in incremental income Should the company pursue this strategy and the double shift? (6,920) No

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