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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 $ 90 $ 120 Selling price per unit Variable costs per unit 30 72 Contribution margin per unit $ 60 $ 48 Machine hours to produce 0.4 hours 1 hours unit 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 $6,000 additional fixed costs per month. (Round hours per unit answers to 1 decimal place.) 1. Determine the contribution margin per machine hour that each product generates. Product B Product G $ Contribution margin per unit 48.00 Machine hours per unit 1.0 Contribution margin per machine hour 48.00 Product G Maximum number of units to be sold 600 200 Hours required to produce maximum units 240 200 440 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 176 0 176 Units produced for most profitable sales mix 440 0 Contribution margin per unit 60.00 $ 0.00 Total contribution margin - one shift 26,400 60.00 0.4 26,400 $ $ Product B $ Total

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 $ 90 $ 120 Selling price per unit Variable costs per unit 30 72 Contribution margin per unit $ 60 $ 48 Machine hours to produce 0.4 hours 1 hours unit 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 $6,000 additional fixed costs per month. (Round hours per unit answers to 1 decimal place.) 1. Determine the contribution margin per machine hour that each product generates. Product B Product G $ Contribution margin per unit 48.00 Machine hours per unit 1.0 Contribution margin per machine hour 48.00 Product G Maximum number of units to be sold 600 200 Hours required to produce maximum units 240 200 440 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 176 0 176 Units produced for most profitable sales mix 440 0 Contribution margin per unit 60.00 $ 0.00 Total contribution margin - one shift 26,400 60.00 0.4 26,400 $ $ Product B $ Total

FINANCIAL ACCOUNTING
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 Production Analysis --- Edgerron Company is able to produce two products, G and B, with the same machine in its factory. Below is the detailed information available: | | Product G | Product B | | --- | --- | --- | | **Selling price per unit** | $90 | $120 | | **Variable costs per unit** | $30 | $72 | | **Contribution margin per unit** | $60 | $48 | | **Machine hours to produce 1 unit** | 0.4 hours | 1 hour | | **Maximum unit sales per month** | 600 units | 200 units | --- The company is currently operating the machine for a single eight-hour shift for 22 working days each month. There are considerations to operate the machine for two shifts, increasing its productivity by an additional eight hours per day for 22 days per month, which would require an additional $6,000 in fixed costs per month. The following calculations and analysis are provided: --- ### 1. Contribution Margin per Machine Hour for Each Product | | Product G | Product B | | --- | --- | --- | | **Contribution margin per unit** | $60.00 | $48.00 | | **Machine hours per unit** | 0.4 | 1.0 | | **Contribution margin per machine hour** | (rounded) $**150** | $48.00 | --- ### 2. Maximum Production Analysis for a Single Shift | | Product G | Product B | Total | | --- | --- | --- | --- | | **Maximum number of units to be sold** | 600 | 200 | | | **Hours required to produce maximum units** | 240 | 200 | **440** | ### 3. Optimal Production Mix for Single Shift With a single shift, the optimal production mix would involve allocating hours based on the highest contribution margin per machine hour: | | Product G | Product B | Total | | --- | --- | --- | --- | | **Hours dedicated to the production** | 176 | 0 | **176** | | **Units produced for most profitable sales mix** | 440 | 0 | | | **Contribution margin per unit** | $60.00 | $0.00 | | | **Total contribution margin - one shift** | $26,400 | $0.
Transcribed Image Text:#### Edgerron Company Production Analysis --- Edgerron Company is able to produce two products, G and B, with the same machine in its factory. Below is the detailed information available: | | Product G | Product B | | --- | --- | --- | | **Selling price per unit** | $90 | $120 | | **Variable costs per unit** | $30 | $72 | | **Contribution margin per unit** | $60 | $48 | | **Machine hours to produce 1 unit** | 0.4 hours | 1 hour | | **Maximum unit sales per month** | 600 units | 200 units | --- The company is currently operating the machine for a single eight-hour shift for 22 working days each month. There are considerations to operate the machine for two shifts, increasing its productivity by an additional eight hours per day for 22 days per month, which would require an additional $6,000 in fixed costs per month. The following calculations and analysis are provided: --- ### 1. Contribution Margin per Machine Hour for Each Product | | Product G | Product B | | --- | --- | --- | | **Contribution margin per unit** | $60.00 | $48.00 | | **Machine hours per unit** | 0.4 | 1.0 | | **Contribution margin per machine hour** | (rounded) $**150** | $48.00 | --- ### 2. Maximum Production Analysis for a Single Shift | | Product G | Product B | Total | | --- | --- | --- | --- | | **Maximum number of units to be sold** | 600 | 200 | | | **Hours required to produce maximum units** | 240 | 200 | **440** | ### 3. Optimal Production Mix for Single Shift With a single shift, the optimal production mix would involve allocating hours based on the highest contribution margin per machine hour: | | Product G | Product B | Total | | --- | --- | --- | --- | | **Hours dedicated to the production** | 176 | 0 | **176** | | **Units produced for most profitable sales mix** | 440 | 0 | | | **Contribution margin per unit** | $60.00 | $0.00 | | | **Total contribution margin - one shift** | $26,400 | $0.
### Production Analysis and Decision-Making: Additional Shift and Marketing Strategy #### Scenario 3: Evaluation of Additional Shift **Question:** 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? ##### Data for Analysis: **Table 1: Calculations for Additional Shift** | | **Product G** | **Product B** | **Total** | |----------------------------|---------------|---------------|-----------| | **Hours dedicated to the production of each product** | 240 | | 240 | | **Units produced for most profitable sales mix** | 600 | | | | **Contribution margin per unit** | $60.00 | | | | **Total contribution margin - two shifts** | $36,000 | | | - **Hours Dedicated to Production:** The table shows that 240 hours are dedicated to the production of both products. - **Units Produced:** 600 units of Product G are produced for the most profitable sales mix. - **Contribution Margin per Unit:** Each unit of Product G contributes $60.00 to the margin. - **Total Contribution Margin:** The total contribution margin from two shifts amounts to $36,000. #### Scenario 4: Impact of Marketing Strategy on Sales Increase **Question:** Suppose that the company determines that it can increase Product G's maximum sales to 700 units per month by spending $5000 per month on marketing efforts. Should the company pursue this strategy and the double shift? ##### Data for Analysis: **Table 2: Calculations for Marketing Strategy and Double 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** | | | | | **Total contribution margin - two shifts and marketing campaign** | | | | This table is incomplete and requires further data entry for: - **Hours Dedicated to Production:** Additional hours contributing to the production of both products need to be determined. - **Units Produced:** The feasible units produced considering the marketing campaign costing $5000. - **Contribution Margin per Unit:** The potential
Transcribed Image Text:### Production Analysis and Decision-Making: Additional Shift and Marketing Strategy #### Scenario 3: Evaluation of Additional Shift **Question:** 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? ##### Data for Analysis: **Table 1: Calculations for Additional Shift** | | **Product G** | **Product B** | **Total** | |----------------------------|---------------|---------------|-----------| | **Hours dedicated to the production of each product** | 240 | | 240 | | **Units produced for most profitable sales mix** | 600 | | | | **Contribution margin per unit** | $60.00 | | | | **Total contribution margin - two shifts** | $36,000 | | | - **Hours Dedicated to Production:** The table shows that 240 hours are dedicated to the production of both products. - **Units Produced:** 600 units of Product G are produced for the most profitable sales mix. - **Contribution Margin per Unit:** Each unit of Product G contributes $60.00 to the margin. - **Total Contribution Margin:** The total contribution margin from two shifts amounts to $36,000. #### Scenario 4: Impact of Marketing Strategy on Sales Increase **Question:** Suppose that the company determines that it can increase Product G's maximum sales to 700 units per month by spending $5000 per month on marketing efforts. Should the company pursue this strategy and the double shift? ##### Data for Analysis: **Table 2: Calculations for Marketing Strategy and Double 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** | | | | | **Total contribution margin - two shifts and marketing campaign** | | | | This table is incomplete and requires further data entry for: - **Hours Dedicated to Production:** Additional hours contributing to the production of both products need to be determined. - **Units Produced:** The feasible units produced considering the marketing campaign costing $5000. - **Contribution Margin per Unit:** The potential
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