Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

I am having trouble with #3 and #4. Edgerron Company is able to produce two products, G and B, with the same machine in its

I am having trouble with #3 and #4.

image text in transcribedimage text in transcribedimage text in transcribedimage text in transcribed

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 $ 50 10 $ 40 0.4 hours 600 units Product B $ 80 48 $ 32 1.0 hours 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 $4,000 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 Contribution margin per unit | $ 40.00 Machine hours per unit 0.4 Contribution margin per machine hour | $ 100.00 Product Maximum number of units to be sold 600 Hours required to produce maximum units C 240 Product B $ 32.00 1.0 $ 32.00 Product B 200 200 Total 440 176 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 176 Units produced for most profitable sales mix 440 Contribution margin per unit $ 40.00 $ 0.00 Total contribution margin-one shift $ 17,600 $ 17,600 4. Suppose the company determines that it can increase Product G's maximum sales to 700 units per month by spending $3,000 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 2401 Contribution margin per unit 40.00 Contribution margin 9,600 $ 0 $ 31,584 Additional fixed costs $ 4,000 Incremental income $ 27,584 A A 700 40.00 28,000 72 32.00 2,304 $ $ A $ 15 A 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? $ 15 15 15 15 I added 15 to each box to get the headings to show up $

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Computer Accounting With Peachtree Complete 2011

Authors: Carol Yacht, Peachtree Software

15th Edition

007811098X, 978-0078110986

More Books

Students also viewed these Accounting questions

Question

=+c) What were the treatments? Chapter Exercises

Answered: 1 week ago