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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 $ 120 $ 160 Selling price per unit Variable costs per unit 40 90 Contribution margin per unit $ 80 $ 70 Machine hours to produce 1 unit Maximum unit sales per month 0.4 hours 1.0 hours 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 $15,000 additional fixed costs per month. (Round hours per unit answers to 1 decimal place. Enter operating losses, if any, as negative values.)

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 $ 120 $ 160 Selling price per unit Variable costs per unit 40 90 Contribution margin per unit $ 80 $ 70 Machine hours to produce 1 unit Maximum unit sales per month 0.4 hours 1.0 hours 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 $15,000 additional fixed costs per month. (Round hours per unit answers to 1 decimal place. Enter operating losses, if any, as negative values.)

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 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 Variable costs per unit $ 120 $ 160 40 90 Contribution margin per unit $ 80 $70 Machine hours to produce 1 unit Maximum unit sales per month 0.4 hours 1.0 hours 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 $15,000 additional fixed costs per month. (Round hours per unit answers to 1 decimal place. Enter operating losses, if any, as negative values.)
Transcribed Image Text: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 Variable costs per unit $ 120 $ 160 40 90 Contribution margin per unit $ 80 $70 Machine hours to produce 1 unit Maximum unit sales per month 0.4 hours 1.0 hours 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 $15,000 additional fixed costs per month. (Round hours per unit answers to 1 decimal place. Enter operating losses, if any, as negative values.)
4. Suppose the company determines that it can increase Product G's maximum sales to 700 units per month by spending $12,000 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
Transcribed Image Text:4. Suppose the company determines that it can increase Product G's maximum sales to 700 units per month by spending $12,000 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
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