Question

Edgerron Company is able to produce two products, G and B, with the same machine in its factory. The following information is available Product B $ 160 90 Selling price per unit Variable costs per unit Contribution margin per unit Machine hours to produce 1 unit Maximum unit sales per month Product G $ 120 40 $ 80 0.4 hours 600 units $ 70 1.6 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 $15,000 additional fixed costs per month. (Round hours per unit answers to 1 decimal place. Enter operating losses, if any, as negative values.)

Answer 1

Solution Product (9) Contribution pu 1 Mach. hours pu (hrs, Man umtssalen p.m $80 04 600 unts - B $ 70 10 200 vite - Total machine hains = 22 x 8 available in a = 176 hours. single Additional fixed cost for double shift = $15000pm. | G B Product Contribution per hour (aa/b) $200 $70 G B Product Max. hova neped for full production f cxb) 240 hrs. 200 hrs since Contribution per mach. hous G is more than product B and available hour is 176 houn in the company should only forum for product total a month, on product Home Hence G No of onts contribution per hr $200 House con sumed 176 Total Contribution = 176x200 - $35 200. Units of Production: - Product G = 176 t o.u= uno units Product B = o unit cuocanned with CamScanner

Date: 11 on : double 1. Toral Machi hours available = 2x176 = 352 hrs. The Co. will first Imax. of Product G. Loroduce product B. consume Romaining the hours will be to used produce to 5 Product max houn negd. (hrs) To Hours allocated out of 552 ho. c itis, pu GB 240 200 240 12 0.4 No. of el cont products (ole) pu (B) 600 so 112 70 6 Total contribution (dxe) $48000 87840 = $55,840 Note : with l'increance the by change to double shift , contribution (55, Mio - 35,200): $20,640 However, fixed cost is also increased by 815000 - Hence, overall i there is a benefit lof (20 640 15000 = $5660 with double Cel scanned, with CamScanner i ,

soles ull if 1 Product . Addikenal G max freed cost = 700 units $12.000 . Product mar Sales (unit)...! Mach. hr. Du o ( , 100 0,4 200 10 o Max hr. read. 28ohr. tot 200hr. Dl Contrato per ht. $200 ', $70 0 Hours allocation (352hrs) 280 72 & Total Conta (dxe) $56000 $5040 - Total conto = less: Marketing lost a Return less: Add. freed cost $61,000 (2000). 49.000 (15000) 34040 Proposal Shift Product "G E B pe is Rinale a 1 c Double R 600 1112 3 Double 700 / 72 C Contribution () : 35,200, less: fired lost MKS. lost Net Income ($) 35,200 55,840 (15000) 61,040 02 (15000) (12000) 34,040 40,840 Therefore, the Co. should not go for s Sonned with CamScanner proposal