Question

AULUIH Lo 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 $ 140 55 Selling price per unit Variable costs per unit Contribution margin per unit Machine hours to produce 1 unit Maximum unit sales per month $ 85 Product B $ 170 102 $ 68 1.0 hours 200 units 0.4 hours 500 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 $8,500 additional fixed costs per month. (Round hours per unit answers to 1 decimal place. Enter operating losses, if any, as negative values.) Answer is not complete. 1. Determine the contribution margin per machine hour that each product generates Product Product B $ 68.00 Contribution margin per unit Machine hours per unit Contribution margin per machine hour 1.0 85.00 0.4 212.50 Product 500 $ 68.00 Product B 200 Total Maximum number of units to be sold < Prev 1 of 1 Next >

Answer 1

1						product G	product B
	Contribution margin per unit					85	68
	machine hours per unit					0.4	1
	contribution margin per machine hour					212.5	68
						product G	product B	total
	Maximum number of units to be sold					500	200
	hours required to produce maximum units					200	200	400
2)						product G	product B	total
	hours dedicated to the production of each product					176		176
	units produced for most profitable sales mix					440
	contribution margin per unit					85
	total contribution margin - one shift					37400		37,400
3)						product G	product B	total
	hours dedicated to the production of each product					200	152	352
	units produced for most profitable sales mix					500	152
	contribution margin per unit					85	68
	total contribution margin-two shifts					42500	10336	52836
	contribution margin -one shifts							37,400
	change in contribution margin							15,436
	change in fixed costs							8,500
	change in operating income (loss)							6,936
	should the company pursue marketing campaign					yes
4)						product G	product B	total
	hours dedicated to the production of each product					240	112	352
	units produced for most profitable sales mix					600	112
	contribution margin per unit					85	68
	total contribution margin-two shifts & marketing campaogn					51000	7616	58616
	contribution margin -two shifts without marketing ca							52,836
	change in contribution margin							5,780
	Additional marketing costs							7,500
	change in fixed costs							8,500
	change in operating income (loss)							-10,220
	should the company pursue marketing campaign					No