The following information Is Edgerron Company is able to produce two products, G
ID: 2408536 • Letter: T
Question
The following information Is Edgerron Company is able to produce two products, G and B, with the same mac available. hine in its factory. Product G Product B $ 200 120 $ 80 0.4 hours 1.0 hours 600 units 200 units 170 70 Selling price per unit Variable costs per unit Contribution margin per unit Machine hours to produce 1 unit Maximum unit sales per month 100 month. Management is thinking The company presently operates the machine for a single eight-hour shift for 22 working days each 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 S10.000 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 Contribution margin per machine hour Product G Product B Total 600 200 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 shiftExplanation / Answer
Answer to this question is as follows: (Answer in $)
Part 1) Product G Product B
Contribution margin per unit ($) 100 80
Machine hours per unit 0.4 1
Contribution margin per unit ($) 250 80
Product G Product B
Maximum no. of units to be sold 600 200
Hours required to produce max. units 240 200 total hours : 440 hours
Parts 2) Product G Product B
Hours dedicated.. (total 176 hours) 176
Units produced for most... 440
Contribution margin per unit 100
Total contribution margin -one shift = $ 44000
Part 3) Product G Product B
Hours dedicated..(total 352hrs) 240 112
units produced for most... 600 112
contribution margin per unit 100 80
Total contribution margin = 2nd shift $60000 $8960
Total contribution margin 2nd shift = $68960
Total contribution margin one shift= $44000
change in contribution margin = $ 24960
change in fixed cost= $10000
change in operating income= $14960
Should the company add another shift = Yes
Part 4) Product G Product B
hours dedicated...(total 352hrs) 280 72
units produced for most.... 700 72
Contribution margin per unit 100 80
Total contribution margin $70000 $5760
Total contribution margin 2nd shift and with marketing campaign = $75760
Total contribution margin 2nd shift and without marketing campaign = $68960
change in contribution margin = $ 6800
change in fixed cost = $10000
additional marketing cost= $9000
Net operation loss= $6800-$10000- $9000= $(12200)
Should the company pursue the marketing campaign = NO
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