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Ive been stuck on this one for a while, how do you add up the total incremental income as well? Thanks Edgerron Company is able
Ive been stuck on this one for a while, how do you add up the total incremental income as well? Thanks
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 Selling price per unit $ 100 Variable costs per unit 35 Contribution margin per $ 65 unit Machine hours to produce 0.4 hours 1 unit Maximum unit sa les per 500 units month Product B $ 130 78 $ 52 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 $6,500 additional fixed costs per month. (Round hours per unit answers to 1 decimal place. Enter operating losses, if any, as negative values.) X Answer is not complete. 11. Determine the contribution margin per machine hour that each product generates. Product Product G Contribution margin per unit Machine hours per unit Contribution margin per machine hour $ 65.00 0. 4 $ 162.50 Product $ 52.00 L 1.07 $ 52.00 Product Total G B Maximum number of units to be sold Hours required to produce maximum units 500 2007 250 2507 4 50 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 Total 176 Hours dedicated to the production of each product Units produced for most profitable sales mix Contribution margin per unit Total contribution margin-one shift 176 440 $ 65.00 $ 28,600 L $ 28,600V 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 Imonth? Should the company add the new shift? Product Product Total 352 200 5007 $ 65.00 $ 32,500 152 1 527 52.00 7,904 $ $ Hours dedicated to the production of each product Units produced for most profitable sales mix Contribution margin per unit Total contribution margin-two shifts Total contribution margin-one shift Change in contribution margin Change in fixed costs Change in operating income(loss) Total incremental income Should the company add another shift? $ 40,404 28,600 11,804 6,500 $ 5,304 Yes 4. Suppose the company determines that it can increase Product G's maximum sales to 600 units per month by spending $5,500 per month in marketing efforts. Should the company pursue this strategy and the double shift? Compute total incremental income. Product Product Total Second shift without marketing campaign: Units produced for most profitable sales mix Contribution margin per unit Contribution margin Additional fixed costs Incremental income $ $ 600X 65.00 39,000 $ $ 1 12 52.00 5,824 $ 44,824x $ 5,500 $ 0 $ 0 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? XXXXStep by Step Solution
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