s able to produce two products, G and B, with the same machine in its factory. T
ID: 2596234 • Letter: S
Question
s able to produce two products, G and B, with the same machine in its factory. The following information is available. le costs per unit Contribution margin per unit Rachine hours to produce 1 unit Maximum unit sales per s 52 1.e hours 250 units s 65 e.4 hours 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 $6,500 add fixed costs per month. (Round hours per unit answers to 1 decimal place. Enter 500 of units to be sold 129 AMExplanation / Answer
1
Determine the contribution margin per machine hour that each product generates
Product G
Product B
Total
Contribution Margin per unit
65
52
Machine hours per unit
0.4 hours
1 hours
Contribution Margin per Machine hour
26
52
Product G
Product B
Maximum number of units to be sold
500 units
250 units
Hours required to produce maximum units
200
250
450
2
How many units Product G and Product B should the company if it continues to operate
Product G
Product B
Total
Hours dedicated to production of each product
176
176
Units produced for most profitable sales mix
450
Contribution Margin per unit
65
Total contribution Margin - one shift
29250
29250
3
If company adds another shift, how many of product G and product B should it produce?
Product G
Product B
Total
Hours dedicated to production of each product
200
152
352
Units produced for most profitable sales mix
500
152
Contribution Margin per unit
65
52
Total contribution Margin - two shift
32500
7904
40404
Total contribution Margin - one shift
29250
change in contribution Margin
11154
Change in fixed costs
6500
change in operating income (loss)
4654
Should the company add another shift
yes
4
Product G
Product B
Total
Hours dedicated to production of each product
240
112
352
Units produced for most profitable sales mix
600
112
Contribution Margin per unit
65
52
Total contribution Margin - two shift and marketing campaign
39000
5824
44824
Total contribution Margin - two shift With out marketing campaign
29250
change in contribution Margin
15574
Additional Marketing costs
5500
Change in fixed costs
6500
change in operating income (loss)
-3574
should compny pursue Marketing campaign
No
1
Determine the contribution margin per machine hour that each product generates
Product G
Product B
Total
Contribution Margin per unit
65
52
Machine hours per unit
0.4 hours
1 hours
Contribution Margin per Machine hour
26
52
Product G
Product B
Maximum number of units to be sold
500 units
250 units
Hours required to produce maximum units
200
250
450
2
How many units Product G and Product B should the company if it continues to operate
Product G
Product B
Total
Hours dedicated to production of each product
176
176
Units produced for most profitable sales mix
450
Contribution Margin per unit
65
Total contribution Margin - one shift
29250
29250
3
If company adds another shift, how many of product G and product B should it produce?
Product G
Product B
Total
Hours dedicated to production of each product
200
152
352
Units produced for most profitable sales mix
500
152
Contribution Margin per unit
65
52
Total contribution Margin - two shift
32500
7904
40404
Total contribution Margin - one shift
29250
change in contribution Margin
11154
Change in fixed costs
6500
change in operating income (loss)
4654
Should the company add another shift
yes
4
Product G
Product B
Total
Hours dedicated to production of each product
240
112
352
Units produced for most profitable sales mix
600
112
Contribution Margin per unit
65
52
Total contribution Margin - two shift and marketing campaign
39000
5824
44824
Total contribution Margin - two shift With out marketing campaign
29250
change in contribution Margin
15574
Additional Marketing costs
5500
Change in fixed costs
6500
change in operating income (loss)
-3574
should compny pursue Marketing campaign
No
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