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 $4,500 additional fixed costs per month. (Round hours per unit answers to 1 decimal place. Enter operating losses, if any, as negative values.)Determine the contribution margin per machine hour that each product generates. 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 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 Suppose that the company determines that it can increase Product G's maximum sales to 700 units per month by spending $3500 per month in marketing efforts. Should the company pursue this strategy and the double shift

Explanation / Answer

1.

Contribution Margin per machine hour that each product generates is calculated as under:

2.

Units produced when only 1 shift is taken is calculated as under:

3.

Adding one more shift details required are as follow:

4.

Product G Product B Total Contribution Margin per unit 45 36 Machine hours to produce 1 unit 0.4 1 Contribution Margin per machine hour 112.5 36 Maximum Number of units to be sold 600 200 800 Hours required to produce maximum units 240 200 800

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