Edgerron Company is able to produce two products, G and B, with the same machine in its factory. The following information is available. Product GProduct BSelling price per unit $50 $80 Variable costs per unit 10 48 Contribution margin per unit $40 $32 Machine hours to produce 1 unit 0.4hours 1.0hours Maximum unit sales per month 600units 200units 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 $4,000 additional fixed costs per month. (Round hours per unit answers to 1 decimal place. Enter operating losses, if any, as negative values.) This change would require $4,000 additional fixed costs per month. (Round hours per unlt answers to 1 declmal place. Enteroperating losses, If any, as negatlve values.)1. Determine the contribution margin per machine hour that each product generates.Product GProduct BContribution margin per unitContribution margin per machine hourProduct GProduct BTotalMaximum number of units to be sold600200Hours required to produce maximum units2. 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?Product GProduct BTotalHours dedicated to the production of each productUnits produced for most profitable sales mixContribution margin per unitTotal contribution margin one shift3. If the company adds another shift, how many units of Product G and Product B should it produce? How much totalincremental income would this mix produce each month? Should the company add the new shift?Product GProduct BTotalHours dedicated to the production of each productUnits produced for most profitable sales mixContribution margin per unit< Prev4 of 7Next >3_41913..jpg143798560 45373...jpg144560148 79137...jpg144211699 21846..jpgpe here to searchロ 0CF5F1F2F3F4F6F7F8F9F1023$424.6.7896. Contribution margin per unitTotal contribution margin - two shiftsTotal incremental income4. Suppose the company determines that it can increase Product G's maximum sales to 700 units per month by spending$3.000 per month in marketing efforts. Should the company pursue this strategy and the double shift? Compute totalincremental income.Product GProduct BTotalSecond shift without marketing campaign:Units produced for most profitable sales mixContribution margin per unitContribution marginSecond shift with marketing campaign:Units produced for most profitable sales mixContribution margin per unitContribution margin< Prev4 of 7Next >58 41913..jpg143798560 45373...jpg144560148 79137...jpg144211699 21846ype here to searchCF5F1F2F3F4F6F7F8团对

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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

	Product G	Product B
Selling price per unit			$	50			$	80
Variable costs per unit				10				48
Contribution margin per unit			$	40			$	32
Machine hours to produce 1 unit		0.4	hours		1.0	hours
Maximum unit sales per month		600	units		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 $4,000 additional fixed costs per month. (Round hours per unit answers to 1 decimal place. Enter operating losses, if any, as negative values.)

This change would require $4,000 additional fixed costs per month. (Round hours per unlt answers to 1 declmal place. Enter
operating losses, If any, as negatlve values.)
1. Determine the contribution margin per machine hour that each product generates.
Product G
Product B
Contribution margin per unit
Contribution margin per machine hour
Product G
Product B
Total
Maximum number of units to be sold
600
200
Hours required to produce maximum units
2. 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?
Product G
Product B
Total
Hours dedicated to the production of each product
Units produced for most profitable sales mix
Contribution margin per unit
Total contribution margin one shift
3. If the company adds another shift, how many units of Product G and Product B should it produce? How much total
incremental income would this mix produce each month? Should the company add the new shift?
Product G
Product B
Total
Hours dedicated to the production of each product
Units produced for most profitable sales mix
Contribution margin per unit
< Prev
4 of 7
Next >
3_41913..jpg
143798560 45373...jpg
144560148 79137...jpg
144211699 21846..jpg
pe here to search
ロ 0
C
F5
F1
F2
F3
F4
F6
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23
$4
2
4.
6.
7
8
96.

Contribution margin per unit
Total contribution margin - two shifts
Total incremental income
4. Suppose the company determines that it can increase Product G's maximum sales to 700 units per month by spending
$3.000 per month in marketing efforts. Should the company pursue this strategy and the double shift? Compute total
incremental income.
Product G
Product B
Total
Second shift without marketing campaign:
Units produced for most profitable sales mix
Contribution margin per unit
Contribution margin
Second shift with marketing campaign:
Units produced for most profitable sales mix
Contribution margin per unit
Contribution margin
< Prev
4 of 7
Next >
58 41913..jpg
143798560 45373...jpg
144560148 79137...jpg
144211699 21846
ype here to search
C
F5
F1
F2
F3
F4
F6
F7
F8
团
对

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