Edgerron Company is able to produce two products, G and B, with the same machine

Question

Edgerron Company is able to produce two products, G and B, with the same machine in its factory. The following information is available.

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 $13,500 additional fixed costs per month. (Round hours per unit answers to 1 decimal place. Enter operating losses, if any, as negative values.)

Edgerron Company is able to produce two products, G and B, with the same machine in its factory. The following information is available.

1. Determine the contribution margin per machine hour that each product generates Product G Product B Contribution margin per unit Machine hours per unit Contribution margin per machine hour 135.00 $ 108.00 1.0 108.00 Product G Product B Total Maxi mum number of units to be sold 650 250 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 Product B should it produce? How much total contribution margin would 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 two shifts

Explanation / Answer

Total machine hours 22 * 8   = 176 hrs

Hours under double shifit = 22*8*2 = 352 hours

2)

$59,400

3)

4)

Profit                                                                                                                 $76,276

No should not pursue this strategy as profit declined

Product G Product B Total Contribution margin per unit $135 $108 Machine hours per unit .4 1 Contribution margin per machine hour $337.50 $108 Maximum number of units to be sold 650 250 Hours required to produce maximum units 260 250 510

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