Problem 23-5A Analyzing sales mix strategies LO P3 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 $ 230 Product B $ 260 Selling price per unit Variable costs per unit 1ee 156 Contribution margin per unit $130 104 Machine hours to produce 1 unit Maximum unit sales per month e.4 hours 650 units 1.0 hours 25e units The company presently operates the machine for a single elght-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 elght hours per day for 22 days per month This change would require $13,000 additional fixed costs per month. (Round hours per unit enswers to 1 decimel plece. Enter operating losses, If any, as negetive values.) 1. Determine the contribution margin per machine hour that each product generates Product G Product B Contribution margin per unit Contribution margin per machine hour Product B Total Product G 250 650 Maximum number of units to be sold Hours required to produce maximum units 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 Units produced for most profitable sales mix Contribution margin per unit Total contribution margin- one shift 3 If the company adds another shift, how many units of Product G and Produat 8 should it produce? How much total incremental income would this mix produce each month? Should the company add the new shift? Total Product B Product G Hours dedicated to the production of each product Units produced for most proftable sales mix Contribution margin per unit Total contribution margin-two shifts Hours required to produce maximum units 2 How many units of Product G and Product B should the company produce if it continues to operate with only one shit? How much total contribution margin does this mix produce each month? Product G Product B Total Hours dedicated to the production of each product Units produced for most profitable sales mix Contribution margin per unit Total contribution margin-one shift 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 Units produced for most profitable sales mix Contribution margin per unit Total contribution margin-two shifts Total incremental income 4. Suppose the company determines that it can inorease Product G's maximum sales to 700 units per month by spending $12,000 per month in marketing efforts. Should the company pursue this strategy and the double shift? Compute total incremental income Product G Total Product B Second shift without markketing campaign Units produced for most profitable sales max Contribution margin per unit Contribution margin Second shift with marketing campaign: Units produced for most profitable sales mix Contribution margin per unit Contribution margin
