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.

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

Selling price per unit Variable costs per unit Product G $180 75 Product B $210 126 Contribution margin per unit $ 105 $ 84 Machine hours to produce 1 unit Maximum unit sales per month 0.4 hours 550 units 1.0 hours 200 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 $10,500 additional fixed costs per month. (Round hours per unit answers to 1 decimal place. Enter operating losses, if any, as negative values.)

Explanation / Answer

Answer 1. Product G Product B Contribution Margin per Unit (A)              105.00                    84.00 Machine Hrs to Produce one Unit (B)                  0.40                      1.00 Contribution Margin per Mach. Hr (A /B)              262.50                    84.00 Product G Product B Total Max. No. of Units to be Sold                    550                       200 Hrs. reqd. to produce max. units                    220                       200                420 Answer 2. Product G Product B Total Hours dedicated to production of each product                    176                           -   Units produced fo the most profitable sales mix                    440                           -   Contribution Margin per Unit                    105                          84 Total Contribution Margin - one Shift              46,200                           -            46,200 Answer 3. Product G Product B Total Hours dedicated to production of each product                    220                       132                352 Units produced fo the most profitable sales mix                    550                       132 Contribution Margin per Unit                    105                          84 Total Contribution Margin - Two Shift              57,750                 11,088          68,838 Total Contribution Margin - one Shift          46,200 Change in Contribution Margin          22,638 Change in Fixed Costs          10,500 Change in operating income (Loss)          12,138 Should the company add another shift Yes Answer 4. Product G Product B Total Hours dedicated to production of each product                    240                       112                352 Units produced fo the most profitable sales mix                    600                       112 Contribution Margin per Unit                    105                          84 Total Contribution Margin - Two Shift & Mkt. Campaign              63,000                    9,408          72,408 Total Contribution Margin - Two Shifts without Mkt. Campaign          68,838 Change in Contribution Margin            3,570 Additional Mkt. Costs            9,500 Change in Fixed Costs          10,500 Change in operating income (Loss)       (16,430) Should the company pursue the Marketing Campaign No

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