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 $12,000 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 $11000 per month in marketing efforts. Should the company pursue this strategy and the double shift?

Explanation / Answer

EDGERRON COMPANY 1 DETERMINE THE CONTRIBUTION MARGIN PER MACHINE HOUR THAT EACH PPRODUCT GENERATES: PRODUCT G PRODUCT B CONTRIBUTION MARGIN PER UNIT 120 96 CONTRIBUTION MARGIN PER MACHINE HOUR 0.4 1 PRODUCT G PRODUCT B MAXIMUM NO OF UNITS TO BE SOLD 650 250 HOURS REQUIRED TO PRODUCE MAXIMUM UNITS 260 250 2 HOW MANY UNITS OF PRODUCT G AND PRODUCT B SHOULD THE COMPANY PRODUCE IF IT CONTINUE TO OPERATE WITH ONLY ONE SHIT ? HOW MANY TOTAL CONTRIBUTION MARGIN DOES THIS MIX PRODUCE EACH MONTH ? PRODUCT G PRODUCT B TOTAL HOURS DEDICATED TO THE PRODUTION OF EACH PRODUCT 176 176 UNITS PRODUCED FOR MOST PROFITABLE SALES MIX 440 CONTRIBUTION MARGIN PER UNIT 120 TATOL CONTRIBUTION MARGIN - ONE SHIFT 52800 $52,800 3 IF THE COMPANY ADD ANOTHER SHIFT, HOW MANY UNITS PRODUCT G PRODUCT B TOTAL OF PRODUCT G AND PRODUCT B SHOULD IT PRODUCE ? HOW MANY TOTAL CONTRIBUTION MARGIN WOULD THIS MIX PRODUCE EACH MONTH? HOURS DEDICATED TO THE PRODUCTION OF EACH PRODUCT 260 92 352 UNITS PRODUCED TO THE MOST PROFITABLE SALES MIX 650 92 CONTRIBUTION MARGIN PER UNIT 120 96 TOTAL CONTRIBUTION MARGIN - TWO SHIFTS 78000 8832 86832 4 SUPPOSE THAT THE COMPANY DETERMINE THAT IT CAN INCREASE PRODUCT G PRODUCT B TOTAL PRODUCT G MAXIMUM SALES TO 700 UNITS PER MONTH BY SPENDING $11000 PER MONTH IN MARKETING EFFORTS. SHOULD THE COMPANY PURSUE THIS STRATEGY AND THE DOUBLE SHIFT? HOURS DEDICATED TO THE PRODUCTION OF EACH PRODUCT 280 72 352 UNITS PRODUCED TO THE MOST PROFITABLE SALES MIX 700 72 CONTRIBUTION MARGIN PER UNIT 120 96 TOTAL CONTRIBUTION MARGIN - TWO SHIFTS & MARKETING 84000 6912 90912 COMPAIGN

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.