Contribution Margin: Contribution Margin is the profit earned from the sale of per unit and is the sum of turnover of the company less their direct sales costs. The margin is computed to measure the company’s ability to pay the fixed costs with the generated revenue after the payment of direct sales costs. The Company always prefer a product with high contribution margins as they can easily cover the cost of manufacturing a product and generate a profit. Requirement-1: To determine: The contribution margin per machine hour of Edgerron Company that is generated by each product.

Question

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Answer 1

Question

Chapter 25, Problem 5APSA

To determine

Introduction:

Contribution Margin:

Contribution Margin is the profit earned from the sale of per unit and is the sum of turnover of the company less their direct sales costs. The margin is computed to measure the company’s ability to pay the fixed costs with the generated revenue after the payment of direct sales costs.

The Company always prefer a product with high contribution margins as they can easily cover the cost of manufacturing a product and generate a profit.

Requirement-1:

To determine:

The contribution margin per machine hour of Edgerron Company that is generated by each product.

Expert Solution

Answer to Problem 5APSA

Solution:

WORKING PAPERS F/ FUND ACCOUNTING, Chapter 25, Problem 5APSA , additional homework tip 1

Explanation of Solution

The contribution margin per machine hour is calculated by using the formula:

$C o n t r i b u t i o n M a r g i n P e r m a c h i n e h o u r = C o n t r i b u t i o n M a r g i n p e r u n i t / M a c h i n e h o u r s t o p r o d u c e 1 u n i t$

Therefore the Contribution Margin per machine hour for the Products G and B are calculated as follows:

Product G:

Given,

Contribution Margin per unit= $80

Machine hours to produce 1 unit= 0.4

Contribution Margin per Unit= $80/0.4=$200

Product B:

Given,

Contribution Margin per unit= $70

Machine hours to produce 1 unit= 1

Contribution Margin per Unit= $70/1=$70

Conclusion

Hence the contribution margin per machine hour for Product G is $200 and Product B is $70.

To determine

Requirement-2:

To determine:

The number of units of Products G and Products B produced by the company and total contribution margin , if the company continues to operate with only one shift.

Expert Solution

Answer to Problem 5APSA

Solution:

WORKING PAPERS F/ FUND ACCOUNTING, Chapter 25, Problem 5APSA , additional homework tip 2

Explanation of Solution

Step-1:

The hours dedicated to the production of each product in single shift = 8 Hours * 22 Working Days

The hours dedicated to the production of each product in single shift = 176 hours

Step-2:

Calculation of Units produced for most profitable sales mix when the company continues

with single shift.

Units Produced for the most profitable sales mix is calculated by using the formula:

$H o u r s d e d i c a t e d t o t h e p r o d u c t i o n o f e a c h p r o d u c t / M a c h i n e h o u r s t o p r o d u c e 1 u n i t$

Therefore the units produced for the most profitable sales mix=176/0.4=440 units

Step-3:

Calculation of contribution margin:

The contribution margin is computed by using the formula below:

Units produced for the most profitable sales mix*Contribution margin per unit

Therefore the contribution margin of the product =440 units*$80=$35,200

Conclusion

Hence the total units produced will be 440 units if the company operates in single shift of 8 hours for 22 working days and its total contribution margin is $35,200.

To determine

Requirement-3a:

To determine:

The number of units of Product G and B produced by the company and total contribution marginif the company adds another shift in addition to 8 hours.

Expert Solution

Answer to Problem 5APSA

Solution:

Below table shows the number of units produced by the company when it adds additional shift, total contribution margin in respect to change of shift.

WORKING PAPERS F/ FUND ACCOUNTING, Chapter 25, Problem 5APSA , additional homework tip 3

Explanation of Solution

Step-1:

Hours dedicated for the production of products is done based on the ratio of maximum sales unit and machine hours to produce each unit.

$H o u r s d e d i c a t e d f o r t h e p r o d u c t i o n o f P r o d u c t G = M a x i m u m u n i t s a l e s p e r m o n t h * M a c h i n e h o u r s t o p r o d u c e 1 u n i t$

Hours dedicated for the production of Product G= 600*0.4=240 hours

Total hours available after adding additional shift=22*16=352 hours

$H o u r s d e d i c a t e d f o r t h e p r o d u c t i o n o f P r o d u c t B = T o t a l h o u r s a v a i l a b l e - H o u r s d e d i c a t e d f o r t h e p r o d u c t i o n o f P r o d u c t G$

Hours dedicated for the production of Product B=352-240=112 hours

Step-2:

Calculation of Units produced for most profitable sales mix when the company adds additional shift:

Product G:

Units produced for most profitable sales mix =240/0.4=600 Units

Product B:

Units produced for most profitable sales mix =112/1=112 Units

$U n i t s p r o d u c e d f o r t h e m o s t p r o f i t a b l e s a l e s m i x = H o u r s d e d i c a t e d t o t h e p r o d u c t i o n o f e a c h u n i t / M a c h i n e h o u r s t o p r o d u c e 1 u n i t$

Step-3:

Calculation of Total Contribution Margin:

The contribution margin is computed by using the formula below:

$\begin{array}{l} U n i t s p r o d u c e d f o r t h e m o s t p r o f i t a b l e s a l e s m i x * C o n t r i b u t i o n m a r g i n p e r u n i t \end{array}$

Contribution Margin for Product G:

Units produced for the most profitable sales mix: 600 Units

Contribution margin per unit: $80

Therefore the contribution margin of Product G is 600 units*$80=$48,000.

Contribution Margin for Product B:

Units produced for the most profitable sales mix: 112 Units

Contribution margin per unit: $70

Therefore the contribution of Product B is 112 units*$70=$7,840.

$T o t a l c o n t r i b u t i o n m a r g i n = C o n t r i b u t i o n m a r g i n o f P r o d u c t G + C o n t r i b u t i o n m a r g i n o f P r o d u c t B$

Therefore the total contribution margin will be $48,000+$7,840=$55,840.

To determine

Requirement-3b:

To discuss:

The company whether to prefer adding new shift in addition to existing single shift of 8 hours.

Expert Solution

Answer to Problem 5APSA

Solution:

Yes, the company should add the new shift in addition to the existing shift of 8 hours.

Explanation of Solution

Increase in additional shift of 8 hours per day promotes the increase in productivity of the Edgerron Company to 712 Units compared to productivity of 440 units when it operates in single shift.

To determine

Requirement-4:

To discuss:

The company whether to pursue the marketing strategy by spending $12,000 additional costs to increase the maximum sales to 700 units of Product G by doubling the shift.

Expert Solution

Answer to Problem 5APSA

Solution:

No, the company should not pursue this marketing strategy with additional costs as this leads to the operating loss of the company.

Explanation of Solution

Below table shows the calculation for products by doubling the shifts and increasing the marketing costs by $12,000 to increase the maximum sales to 700 units.

WORKING PAPERS F/ FUND ACCOUNTING, Chapter 25, Problem 5APSA , additional homework tip 4

$H o u r s d e d i c a t e d f o r t h e p r o d u c t i o n o f P r o d u c t G = M a x i m u m u n i t s a l e s p e r m o n t h * M a c h i n e h o u r s t o p r o d u c e 1 u n i t$

Hours dedicated for the production of Product G= 700*0.4=280 hours

Total hours available after adding additional shift=22*16=352 hours

$H o u r s d e d i c a t e d f o r t h e p r o d u c t i o n o f P r o d u c t B = T o t a l h o u r s a v a i l a b l e - H o u r s d e d i c a t e d f o r t h e p r o d u c t i o n o f P r o d u c t G$

Hours dedicated for the production of Product B=352-280=72 hours

Conclusion

Thereis an operating loss of sales mix for the company of $21,800 and hence the idea of doubling the shift and spending additional costs for marketing to increase sales is not advisable to the management to proceed with.

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Answer 2

Question

Chapter 25, Problem 5APSA

To determine

Introduction:

Contribution Margin:

Contribution Margin is the profit earned from the sale of per unit and is the sum of turnover of the company less their direct sales costs. The margin is computed to measure the company’s ability to pay the fixed costs with the generated revenue after the payment of direct sales costs.

The Company always prefer a product with high contribution margins as they can easily cover the cost of manufacturing a product and generate a profit.

Requirement-1:

To determine:

The contribution margin per machine hour of Edgerron Company that is generated by each product.

Expert Solution

Answer to Problem 5APSA

Solution:

WORKING PAPERS F/ FUND ACCOUNTING, Chapter 25, Problem 5APSA , additional homework tip 1

Explanation of Solution

The contribution margin per machine hour is calculated by using the formula:

$C o n t r i b u t i o n M a r g i n P e r m a c h i n e h o u r = C o n t r i b u t i o n M a r g i n p e r u n i t / M a c h i n e h o u r s t o p r o d u c e 1 u n i t$

Therefore the Contribution Margin per machine hour for the Products G and B are calculated as follows:

Product G:

Given,

Contribution Margin per unit= $80

Machine hours to produce 1 unit= 0.4

Contribution Margin per Unit= $80/0.4=$200

Product B:

Given,

Contribution Margin per unit= $70

Machine hours to produce 1 unit= 1

Contribution Margin per Unit= $70/1=$70

Conclusion

Hence the contribution margin per machine hour for Product G is $200 and Product B is $70.

To determine

Requirement-2:

To determine:

The number of units of Products G and Products B produced by the company and total contribution margin , if the company continues to operate with only one shift.

Expert Solution

Answer to Problem 5APSA

Solution:

WORKING PAPERS F/ FUND ACCOUNTING, Chapter 25, Problem 5APSA , additional homework tip 2

Explanation of Solution

Step-1:

The hours dedicated to the production of each product in single shift = 8 Hours * 22 Working Days

The hours dedicated to the production of each product in single shift = 176 hours

Step-2:

Calculation of Units produced for most profitable sales mix when the company continues

with single shift.

Units Produced for the most profitable sales mix is calculated by using the formula:

$H o u r s d e d i c a t e d t o t h e p r o d u c t i o n o f e a c h p r o d u c t / M a c h i n e h o u r s t o p r o d u c e 1 u n i t$

Therefore the units produced for the most profitable sales mix=176/0.4=440 units

Step-3:

Calculation of contribution margin:

The contribution margin is computed by using the formula below:

Units produced for the most profitable sales mix*Contribution margin per unit

Therefore the contribution margin of the product =440 units*$80=$35,200

Conclusion

Hence the total units produced will be 440 units if the company operates in single shift of 8 hours for 22 working days and its total contribution margin is $35,200.

To determine

Requirement-3a:

To determine:

The number of units of Product G and B produced by the company and total contribution marginif the company adds another shift in addition to 8 hours.

Expert Solution

Answer to Problem 5APSA

Solution:

Below table shows the number of units produced by the company when it adds additional shift, total contribution margin in respect to change of shift.

WORKING PAPERS F/ FUND ACCOUNTING, Chapter 25, Problem 5APSA , additional homework tip 3

Explanation of Solution

Step-1:

Hours dedicated for the production of products is done based on the ratio of maximum sales unit and machine hours to produce each unit.

$H o u r s d e d i c a t e d f o r t h e p r o d u c t i o n o f P r o d u c t G = M a x i m u m u n i t s a l e s p e r m o n t h * M a c h i n e h o u r s t o p r o d u c e 1 u n i t$

Hours dedicated for the production of Product G= 600*0.4=240 hours

Total hours available after adding additional shift=22*16=352 hours

$H o u r s d e d i c a t e d f o r t h e p r o d u c t i o n o f P r o d u c t B = T o t a l h o u r s a v a i l a b l e - H o u r s d e d i c a t e d f o r t h e p r o d u c t i o n o f P r o d u c t G$

Hours dedicated for the production of Product B=352-240=112 hours

Step-2:

Calculation of Units produced for most profitable sales mix when the company adds additional shift:

Product G:

Units produced for most profitable sales mix =240/0.4=600 Units

Product B:

Units produced for most profitable sales mix =112/1=112 Units

$U n i t s p r o d u c e d f o r t h e m o s t p r o f i t a b l e s a l e s m i x = H o u r s d e d i c a t e d t o t h e p r o d u c t i o n o f e a c h u n i t / M a c h i n e h o u r s t o p r o d u c e 1 u n i t$

Step-3:

Calculation of Total Contribution Margin:

The contribution margin is computed by using the formula below:

$\begin{array}{l} U n i t s p r o d u c e d f o r t h e m o s t p r o f i t a b l e s a l e s m i x * C o n t r i b u t i o n m a r g i n p e r u n i t \end{array}$

Contribution Margin for Product G:

Units produced for the most profitable sales mix: 600 Units

Contribution margin per unit: $80

Therefore the contribution margin of Product G is 600 units*$80=$48,000.

Contribution Margin for Product B:

Units produced for the most profitable sales mix: 112 Units

Contribution margin per unit: $70

Therefore the contribution of Product B is 112 units*$70=$7,840.

$T o t a l c o n t r i b u t i o n m a r g i n = C o n t r i b u t i o n m a r g i n o f P r o d u c t G + C o n t r i b u t i o n m a r g i n o f P r o d u c t B$

Therefore the total contribution margin will be $48,000+$7,840=$55,840.

To determine

Requirement-3b:

To discuss:

The company whether to prefer adding new shift in addition to existing single shift of 8 hours.

Expert Solution

Answer to Problem 5APSA

Solution:

Yes, the company should add the new shift in addition to the existing shift of 8 hours.

Explanation of Solution

Increase in additional shift of 8 hours per day promotes the increase in productivity of the Edgerron Company to 712 Units compared to productivity of 440 units when it operates in single shift.

To determine

Requirement-4:

To discuss:

The company whether to pursue the marketing strategy by spending $12,000 additional costs to increase the maximum sales to 700 units of Product G by doubling the shift.

Expert Solution

Answer to Problem 5APSA

Solution:

No, the company should not pursue this marketing strategy with additional costs as this leads to the operating loss of the company.

Explanation of Solution

Below table shows the calculation for products by doubling the shifts and increasing the marketing costs by $12,000 to increase the maximum sales to 700 units.

WORKING PAPERS F/ FUND ACCOUNTING, Chapter 25, Problem 5APSA , additional homework tip 4

$H o u r s d e d i c a t e d f o r t h e p r o d u c t i o n o f P r o d u c t G = M a x i m u m u n i t s a l e s p e r m o n t h * M a c h i n e h o u r s t o p r o d u c e 1 u n i t$

Hours dedicated for the production of Product G= 700*0.4=280 hours

Total hours available after adding additional shift=22*16=352 hours

$H o u r s d e d i c a t e d f o r t h e p r o d u c t i o n o f P r o d u c t B = T o t a l h o u r s a v a i l a b l e - H o u r s d e d i c a t e d f o r t h e p r o d u c t i o n o f P r o d u c t G$

Hours dedicated for the production of Product B=352-280=72 hours

Conclusion

Thereis an operating loss of sales mix for the company of $21,800 and hence the idea of doubling the shift and spending additional costs for marketing to increase sales is not advisable to the management to proceed with.

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Answer 3

Question

Chapter 25, Problem 5APSA

To determine

Introduction:

Contribution Margin:

Contribution Margin is the profit earned from the sale of per unit and is the sum of turnover of the company less their direct sales costs. The margin is computed to measure the company’s ability to pay the fixed costs with the generated revenue after the payment of direct sales costs.

The Company always prefer a product with high contribution margins as they can easily cover the cost of manufacturing a product and generate a profit.

Requirement-1:

To determine:

The contribution margin per machine hour of Edgerron Company that is generated by each product.

Expert Solution

Answer to Problem 5APSA

Solution:

WORKING PAPERS F/ FUND ACCOUNTING, Chapter 25, Problem 5APSA , additional homework tip 1

Explanation of Solution

The contribution margin per machine hour is calculated by using the formula:

$C o n t r i b u t i o n M a r g i n P e r m a c h i n e h o u r = C o n t r i b u t i o n M a r g i n p e r u n i t / M a c h i n e h o u r s t o p r o d u c e 1 u n i t$

Therefore the Contribution Margin per machine hour for the Products G and B are calculated as follows:

Product G:

Given,

Contribution Margin per unit= $80

Machine hours to produce 1 unit= 0.4

Contribution Margin per Unit= $80/0.4=$200

Product B:

Given,

Contribution Margin per unit= $70

Machine hours to produce 1 unit= 1

Contribution Margin per Unit= $70/1=$70

Conclusion

Hence the contribution margin per machine hour for Product G is $200 and Product B is $70.

To determine

Requirement-2:

To determine:

The number of units of Products G and Products B produced by the company and total contribution margin , if the company continues to operate with only one shift.

Expert Solution

Answer to Problem 5APSA

Solution:

WORKING PAPERS F/ FUND ACCOUNTING, Chapter 25, Problem 5APSA , additional homework tip 2

Explanation of Solution

Step-1:

The hours dedicated to the production of each product in single shift = 8 Hours * 22 Working Days

The hours dedicated to the production of each product in single shift = 176 hours

Step-2:

Calculation of Units produced for most profitable sales mix when the company continues

with single shift.

Units Produced for the most profitable sales mix is calculated by using the formula:

$H o u r s d e d i c a t e d t o t h e p r o d u c t i o n o f e a c h p r o d u c t / M a c h i n e h o u r s t o p r o d u c e 1 u n i t$

Therefore the units produced for the most profitable sales mix=176/0.4=440 units

Step-3:

Calculation of contribution margin:

The contribution margin is computed by using the formula below:

Units produced for the most profitable sales mix*Contribution margin per unit

Therefore the contribution margin of the product =440 units*$80=$35,200

Conclusion

Hence the total units produced will be 440 units if the company operates in single shift of 8 hours for 22 working days and its total contribution margin is $35,200.

To determine

Requirement-3a:

To determine:

The number of units of Product G and B produced by the company and total contribution marginif the company adds another shift in addition to 8 hours.

Expert Solution

Answer to Problem 5APSA

Solution:

Below table shows the number of units produced by the company when it adds additional shift, total contribution margin in respect to change of shift.

WORKING PAPERS F/ FUND ACCOUNTING, Chapter 25, Problem 5APSA , additional homework tip 3

Explanation of Solution

Step-1:

Hours dedicated for the production of products is done based on the ratio of maximum sales unit and machine hours to produce each unit.

$H o u r s d e d i c a t e d f o r t h e p r o d u c t i o n o f P r o d u c t G = M a x i m u m u n i t s a l e s p e r m o n t h * M a c h i n e h o u r s t o p r o d u c e 1 u n i t$

Hours dedicated for the production of Product G= 600*0.4=240 hours

Total hours available after adding additional shift=22*16=352 hours

$H o u r s d e d i c a t e d f o r t h e p r o d u c t i o n o f P r o d u c t B = T o t a l h o u r s a v a i l a b l e - H o u r s d e d i c a t e d f o r t h e p r o d u c t i o n o f P r o d u c t G$

Hours dedicated for the production of Product B=352-240=112 hours

Step-2:

Calculation of Units produced for most profitable sales mix when the company adds additional shift:

Product G:

Units produced for most profitable sales mix =240/0.4=600 Units

Product B:

Units produced for most profitable sales mix =112/1=112 Units

$U n i t s p r o d u c e d f o r t h e m o s t p r o f i t a b l e s a l e s m i x = H o u r s d e d i c a t e d t o t h e p r o d u c t i o n o f e a c h u n i t / M a c h i n e h o u r s t o p r o d u c e 1 u n i t$

Step-3:

Calculation of Total Contribution Margin:

The contribution margin is computed by using the formula below:

$\begin{array}{l} U n i t s p r o d u c e d f o r t h e m o s t p r o f i t a b l e s a l e s m i x * C o n t r i b u t i o n m a r g i n p e r u n i t \end{array}$

Contribution Margin for Product G:

Units produced for the most profitable sales mix: 600 Units

Contribution margin per unit: $80

Therefore the contribution margin of Product G is 600 units*$80=$48,000.

Contribution Margin for Product B:

Units produced for the most profitable sales mix: 112 Units

Contribution margin per unit: $70

Therefore the contribution of Product B is 112 units*$70=$7,840.

$T o t a l c o n t r i b u t i o n m a r g i n = C o n t r i b u t i o n m a r g i n o f P r o d u c t G + C o n t r i b u t i o n m a r g i n o f P r o d u c t B$

Therefore the total contribution margin will be $48,000+$7,840=$55,840.

To determine

Requirement-3b:

To discuss:

The company whether to prefer adding new shift in addition to existing single shift of 8 hours.

Expert Solution

Answer to Problem 5APSA

Solution:

Yes, the company should add the new shift in addition to the existing shift of 8 hours.

Explanation of Solution

Increase in additional shift of 8 hours per day promotes the increase in productivity of the Edgerron Company to 712 Units compared to productivity of 440 units when it operates in single shift.

To determine

Requirement-4:

To discuss:

The company whether to pursue the marketing strategy by spending $12,000 additional costs to increase the maximum sales to 700 units of Product G by doubling the shift.

Expert Solution

Answer to Problem 5APSA

Solution:

No, the company should not pursue this marketing strategy with additional costs as this leads to the operating loss of the company.

Explanation of Solution

Below table shows the calculation for products by doubling the shifts and increasing the marketing costs by $12,000 to increase the maximum sales to 700 units.

WORKING PAPERS F/ FUND ACCOUNTING, Chapter 25, Problem 5APSA , additional homework tip 4

$H o u r s d e d i c a t e d f o r t h e p r o d u c t i o n o f P r o d u c t G = M a x i m u m u n i t s a l e s p e r m o n t h * M a c h i n e h o u r s t o p r o d u c e 1 u n i t$

Hours dedicated for the production of Product G= 700*0.4=280 hours

Total hours available after adding additional shift=22*16=352 hours

$H o u r s d e d i c a t e d f o r t h e p r o d u c t i o n o f P r o d u c t B = T o t a l h o u r s a v a i l a b l e - H o u r s d e d i c a t e d f o r t h e p r o d u c t i o n o f P r o d u c t G$

Hours dedicated for the production of Product B=352-280=72 hours

Conclusion

Thereis an operating loss of sales mix for the company of $21,800 and hence the idea of doubling the shift and spending additional costs for marketing to increase sales is not advisable to the management to proceed with.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 25, Problem 5APSA

To determine

Introduction:

Contribution Margin:

Contribution Margin is the profit earned from the sale of per unit and is the sum of turnover of the company less their direct sales costs. The margin is computed to measure the company’s ability to pay the fixed costs with the generated revenue after the payment of direct sales costs.

The Company always prefer a product with high contribution margins as they can easily cover the cost of manufacturing a product and generate a profit.

Requirement-1:

To determine:

The contribution margin per machine hour of Edgerron Company that is generated by each product.

Expert Solution

Answer to Problem 5APSA

Solution:

WORKING PAPERS F/ FUND ACCOUNTING, Chapter 25, Problem 5APSA , additional homework tip 1

Explanation of Solution

The contribution margin per machine hour is calculated by using the formula:

$C o n t r i b u t i o n M a r g i n P e r m a c h i n e h o u r = C o n t r i b u t i o n M a r g i n p e r u n i t / M a c h i n e h o u r s t o p r o d u c e 1 u n i t$

Therefore the Contribution Margin per machine hour for the Products G and B are calculated as follows:

Product G:

Given,

Contribution Margin per unit= $80

Machine hours to produce 1 unit= 0.4

Contribution Margin per Unit= $80/0.4=$200

Product B:

Given,

Contribution Margin per unit= $70

Machine hours to produce 1 unit= 1

Contribution Margin per Unit= $70/1=$70

Conclusion

Hence the contribution margin per machine hour for Product G is $200 and Product B is $70.

To determine

Requirement-2:

To determine:

The number of units of Products G and Products B produced by the company and total contribution margin , if the company continues to operate with only one shift.

Expert Solution

Answer to Problem 5APSA

Solution:

WORKING PAPERS F/ FUND ACCOUNTING, Chapter 25, Problem 5APSA , additional homework tip 2

Explanation of Solution

Step-1:

The hours dedicated to the production of each product in single shift = 8 Hours * 22 Working Days

The hours dedicated to the production of each product in single shift = 176 hours

Step-2:

Calculation of Units produced for most profitable sales mix when the company continues

with single shift.

Units Produced for the most profitable sales mix is calculated by using the formula:

$H o u r s d e d i c a t e d t o t h e p r o d u c t i o n o f e a c h p r o d u c t / M a c h i n e h o u r s t o p r o d u c e 1 u n i t$

Therefore the units produced for the most profitable sales mix=176/0.4=440 units

Step-3:

Calculation of contribution margin:

The contribution margin is computed by using the formula below:

Units produced for the most profitable sales mix*Contribution margin per unit

Therefore the contribution margin of the product =440 units*$80=$35,200

Conclusion

Hence the total units produced will be 440 units if the company operates in single shift of 8 hours for 22 working days and its total contribution margin is $35,200.

To determine

Requirement-3a:

To determine:

The number of units of Product G and B produced by the company and total contribution marginif the company adds another shift in addition to 8 hours.

Expert Solution

Answer to Problem 5APSA

Solution:

Below table shows the number of units produced by the company when it adds additional shift, total contribution margin in respect to change of shift.

WORKING PAPERS F/ FUND ACCOUNTING, Chapter 25, Problem 5APSA , additional homework tip 3

Explanation of Solution

Step-1:

Hours dedicated for the production of products is done based on the ratio of maximum sales unit and machine hours to produce each unit.

$H o u r s d e d i c a t e d f o r t h e p r o d u c t i o n o f P r o d u c t G = M a x i m u m u n i t s a l e s p e r m o n t h * M a c h i n e h o u r s t o p r o d u c e 1 u n i t$

Hours dedicated for the production of Product G= 600*0.4=240 hours

Total hours available after adding additional shift=22*16=352 hours

$H o u r s d e d i c a t e d f o r t h e p r o d u c t i o n o f P r o d u c t B = T o t a l h o u r s a v a i l a b l e - H o u r s d e d i c a t e d f o r t h e p r o d u c t i o n o f P r o d u c t G$

Hours dedicated for the production of Product B=352-240=112 hours

Step-2:

Calculation of Units produced for most profitable sales mix when the company adds additional shift:

Product G:

Units produced for most profitable sales mix =240/0.4=600 Units

Product B:

Units produced for most profitable sales mix =112/1=112 Units

$U n i t s p r o d u c e d f o r t h e m o s t p r o f i t a b l e s a l e s m i x = H o u r s d e d i c a t e d t o t h e p r o d u c t i o n o f e a c h u n i t / M a c h i n e h o u r s t o p r o d u c e 1 u n i t$

Step-3:

Calculation of Total Contribution Margin:

The contribution margin is computed by using the formula below:

$\begin{array}{l} U n i t s p r o d u c e d f o r t h e m o s t p r o f i t a b l e s a l e s m i x * C o n t r i b u t i o n m a r g i n p e r u n i t \end{array}$

Contribution Margin for Product G:

Units produced for the most profitable sales mix: 600 Units

Contribution margin per unit: $80

Therefore the contribution margin of Product G is 600 units*$80=$48,000.

Contribution Margin for Product B:

Units produced for the most profitable sales mix: 112 Units

Contribution margin per unit: $70

Therefore the contribution of Product B is 112 units*$70=$7,840.

$T o t a l c o n t r i b u t i o n m a r g i n = C o n t r i b u t i o n m a r g i n o f P r o d u c t G + C o n t r i b u t i o n m a r g i n o f P r o d u c t B$

Therefore the total contribution margin will be $48,000+$7,840=$55,840.

To determine

Requirement-3b:

To discuss:

The company whether to prefer adding new shift in addition to existing single shift of 8 hours.

Expert Solution

Answer to Problem 5APSA

Solution:

Yes, the company should add the new shift in addition to the existing shift of 8 hours.

Explanation of Solution

Increase in additional shift of 8 hours per day promotes the increase in productivity of the Edgerron Company to 712 Units compared to productivity of 440 units when it operates in single shift.

To determine

Requirement-4:

To discuss:

The company whether to pursue the marketing strategy by spending $12,000 additional costs to increase the maximum sales to 700 units of Product G by doubling the shift.

Expert Solution

Answer to Problem 5APSA

Solution:

No, the company should not pursue this marketing strategy with additional costs as this leads to the operating loss of the company.

Explanation of Solution

Below table shows the calculation for products by doubling the shifts and increasing the marketing costs by $12,000 to increase the maximum sales to 700 units.

WORKING PAPERS F/ FUND ACCOUNTING, Chapter 25, Problem 5APSA , additional homework tip 4

$H o u r s d e d i c a t e d f o r t h e p r o d u c t i o n o f P r o d u c t G = M a x i m u m u n i t s a l e s p e r m o n t h * M a c h i n e h o u r s t o p r o d u c e 1 u n i t$

Hours dedicated for the production of Product G= 700*0.4=280 hours

Total hours available after adding additional shift=22*16=352 hours

$H o u r s d e d i c a t e d f o r t h e p r o d u c t i o n o f P r o d u c t B = T o t a l h o u r s a v a i l a b l e - H o u r s d e d i c a t e d f o r t h e p r o d u c t i o n o f P r o d u c t G$

Hours dedicated for the production of Product B=352-280=72 hours

Conclusion

Thereis an operating loss of sales mix for the company of $21,800 and hence the idea of doubling the shift and spending additional costs for marketing to increase sales is not advisable to the management to proceed with.

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Answer 5

Chapter 25, Problem 5APSA

To determine

Introduction:

Contribution Margin:

Contribution Margin is the profit earned from the sale of per unit and is the sum of turnover of the company less their direct sales costs. The margin is computed to measure the company’s ability to pay the fixed costs with the generated revenue after the payment of direct sales costs.

The Company always prefer a product with high contribution margins as they can easily cover the cost of manufacturing a product and generate a profit.

Requirement-1:

To determine:

The contribution margin per machine hour of Edgerron Company that is generated by each product.

Expert Solution

Answer to Problem 5APSA

Solution:

WORKING PAPERS F/ FUND ACCOUNTING, Chapter 25, Problem 5APSA , additional homework tip 1

Explanation of Solution

The contribution margin per machine hour is calculated by using the formula:

$C o n t r i b u t i o n M a r g i n P e r m a c h i n e h o u r = C o n t r i b u t i o n M a r g i n p e r u n i t / M a c h i n e h o u r s t o p r o d u c e 1 u n i t$

Therefore the Contribution Margin per machine hour for the Products G and B are calculated as follows:

Product G:

Given,

Contribution Margin per unit= $80

Machine hours to produce 1 unit= 0.4

Contribution Margin per Unit= $80/0.4=$200

Product B:

Given,

Contribution Margin per unit= $70

Machine hours to produce 1 unit= 1

Contribution Margin per Unit= $70/1=$70

Conclusion

Hence the contribution margin per machine hour for Product G is $200 and Product B is $70.

To determine

Requirement-2:

To determine:

The number of units of Products G and Products B produced by the company and total contribution margin , if the company continues to operate with only one shift.

Expert Solution

Answer to Problem 5APSA

Solution:

WORKING PAPERS F/ FUND ACCOUNTING, Chapter 25, Problem 5APSA , additional homework tip 2

Explanation of Solution

Step-1:

The hours dedicated to the production of each product in single shift = 8 Hours * 22 Working Days

The hours dedicated to the production of each product in single shift = 176 hours

Step-2:

Calculation of Units produced for most profitable sales mix when the company continues

with single shift.

Units Produced for the most profitable sales mix is calculated by using the formula:

$H o u r s d e d i c a t e d t o t h e p r o d u c t i o n o f e a c h p r o d u c t / M a c h i n e h o u r s t o p r o d u c e 1 u n i t$

Therefore the units produced for the most profitable sales mix=176/0.4=440 units

Step-3:

Calculation of contribution margin:

The contribution margin is computed by using the formula below:

Units produced for the most profitable sales mix*Contribution margin per unit

Therefore the contribution margin of the product =440 units*$80=$35,200

Conclusion

Hence the total units produced will be 440 units if the company operates in single shift of 8 hours for 22 working days and its total contribution margin is $35,200.

To determine

Requirement-3a:

To determine:

The number of units of Product G and B produced by the company and total contribution marginif the company adds another shift in addition to 8 hours.

Expert Solution

Answer to Problem 5APSA

Solution:

Below table shows the number of units produced by the company when it adds additional shift, total contribution margin in respect to change of shift.

WORKING PAPERS F/ FUND ACCOUNTING, Chapter 25, Problem 5APSA , additional homework tip 3

Explanation of Solution

Step-1:

Hours dedicated for the production of products is done based on the ratio of maximum sales unit and machine hours to produce each unit.

$H o u r s d e d i c a t e d f o r t h e p r o d u c t i o n o f P r o d u c t G = M a x i m u m u n i t s a l e s p e r m o n t h * M a c h i n e h o u r s t o p r o d u c e 1 u n i t$

Hours dedicated for the production of Product G= 600*0.4=240 hours

Total hours available after adding additional shift=22*16=352 hours

$H o u r s d e d i c a t e d f o r t h e p r o d u c t i o n o f P r o d u c t B = T o t a l h o u r s a v a i l a b l e - H o u r s d e d i c a t e d f o r t h e p r o d u c t i o n o f P r o d u c t G$

Hours dedicated for the production of Product B=352-240=112 hours

Step-2:

Calculation of Units produced for most profitable sales mix when the company adds additional shift:

Product G:

Units produced for most profitable sales mix =240/0.4=600 Units

Product B:

Units produced for most profitable sales mix =112/1=112 Units

$U n i t s p r o d u c e d f o r t h e m o s t p r o f i t a b l e s a l e s m i x = H o u r s d e d i c a t e d t o t h e p r o d u c t i o n o f e a c h u n i t / M a c h i n e h o u r s t o p r o d u c e 1 u n i t$

Step-3:

Calculation of Total Contribution Margin:

The contribution margin is computed by using the formula below:

$\begin{array}{l} U n i t s p r o d u c e d f o r t h e m o s t p r o f i t a b l e s a l e s m i x * C o n t r i b u t i o n m a r g i n p e r u n i t \end{array}$

Contribution Margin for Product G:

Units produced for the most profitable sales mix: 600 Units

Contribution margin per unit: $80

Therefore the contribution margin of Product G is 600 units*$80=$48,000.

Contribution Margin for Product B:

Units produced for the most profitable sales mix: 112 Units

Contribution margin per unit: $70

Therefore the contribution of Product B is 112 units*$70=$7,840.

$T o t a l c o n t r i b u t i o n m a r g i n = C o n t r i b u t i o n m a r g i n o f P r o d u c t G + C o n t r i b u t i o n m a r g i n o f P r o d u c t B$

Therefore the total contribution margin will be $48,000+$7,840=$55,840.

To determine

Requirement-3b:

To discuss:

The company whether to prefer adding new shift in addition to existing single shift of 8 hours.

Expert Solution

Answer to Problem 5APSA

Solution:

Yes, the company should add the new shift in addition to the existing shift of 8 hours.

Explanation of Solution

Increase in additional shift of 8 hours per day promotes the increase in productivity of the Edgerron Company to 712 Units compared to productivity of 440 units when it operates in single shift.

To determine

Requirement-4:

To discuss:

The company whether to pursue the marketing strategy by spending $12,000 additional costs to increase the maximum sales to 700 units of Product G by doubling the shift.

Expert Solution

Answer to Problem 5APSA

Solution:

No, the company should not pursue this marketing strategy with additional costs as this leads to the operating loss of the company.

Explanation of Solution

Below table shows the calculation for products by doubling the shifts and increasing the marketing costs by $12,000 to increase the maximum sales to 700 units.

WORKING PAPERS F/ FUND ACCOUNTING, Chapter 25, Problem 5APSA , additional homework tip 4

$H o u r s d e d i c a t e d f o r t h e p r o d u c t i o n o f P r o d u c t G = M a x i m u m u n i t s a l e s p e r m o n t h * M a c h i n e h o u r s t o p r o d u c e 1 u n i t$

Hours dedicated for the production of Product G= 700*0.4=280 hours

Total hours available after adding additional shift=22*16=352 hours

$H o u r s d e d i c a t e d f o r t h e p r o d u c t i o n o f P r o d u c t B = T o t a l h o u r s a v a i l a b l e - H o u r s d e d i c a t e d f o r t h e p r o d u c t i o n o f P r o d u c t G$

Hours dedicated for the production of Product B=352-280=72 hours

Conclusion

Thereis an operating loss of sales mix for the company of $21,800 and hence the idea of doubling the shift and spending additional costs for marketing to increase sales is not advisable to the management to proceed with.

Answer 6

Chapter 25, Problem 5APSA

To determine

Introduction:

Contribution Margin:

Contribution Margin is the profit earned from the sale of per unit and is the sum of turnover of the company less their direct sales costs. The margin is computed to measure the company’s ability to pay the fixed costs with the generated revenue after the payment of direct sales costs.

The Company always prefer a product with high contribution margins as they can easily cover the cost of manufacturing a product and generate a profit.

Requirement-1:

To determine:

The contribution margin per machine hour of Edgerron Company that is generated by each product.

Expert Solution

Answer to Problem 5APSA

Solution:

WORKING PAPERS F/ FUND ACCOUNTING, Chapter 25, Problem 5APSA , additional homework tip 1

Explanation of Solution

The contribution margin per machine hour is calculated by using the formula:

$C o n t r i b u t i o n M a r g i n P e r m a c h i n e h o u r = C o n t r i b u t i o n M a r g i n p e r u n i t / M a c h i n e h o u r s t o p r o d u c e 1 u n i t$

Therefore the Contribution Margin per machine hour for the Products G and B are calculated as follows:

Product G:

Given,

Contribution Margin per unit= $80

Machine hours to produce 1 unit= 0.4

Contribution Margin per Unit= $80/0.4=$200

Product B:

Given,

Contribution Margin per unit= $70

Machine hours to produce 1 unit= 1

Contribution Margin per Unit= $70/1=$70

Conclusion

Hence the contribution margin per machine hour for Product G is $200 and Product B is $70.

Answer 7

Chapter 25, Problem 5APSA

To determine

Introduction:

Contribution Margin:

Contribution Margin is the profit earned from the sale of per unit and is the sum of turnover of the company less their direct sales costs. The margin is computed to measure the company’s ability to pay the fixed costs with the generated revenue after the payment of direct sales costs.

The Company always prefer a product with high contribution margins as they can easily cover the cost of manufacturing a product and generate a profit.

Requirement-1:

To determine:

The contribution margin per machine hour of Edgerron Company that is generated by each product.

Answer 8

Expert Solution

Answer to Problem 5APSA

Solution:

WORKING PAPERS F/ FUND ACCOUNTING, Chapter 25, Problem 5APSA , additional homework tip 1

Answer 9

Expert Solution

Answer 10

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

The contribution margin per machine hour is calculated by using the formula:

$C o n t r i b u t i o n M a r g i n P e r m a c h i n e h o u r = C o n t r i b u t i o n M a r g i n p e r u n i t / M a c h i n e h o u r s t o p r o d u c e 1 u n i t$

Therefore the Contribution Margin per machine hour for the Products G and B are calculated as follows:

Product G:

Given,

Contribution Margin per unit= $80

Machine hours to produce 1 unit= 0.4

Contribution Margin per Unit= $80/0.4=$200

Product B:

Given,

Contribution Margin per unit= $70

Machine hours to produce 1 unit= 1

Contribution Margin per Unit= $70/1=$70

Answer 13

Conclusion

Hence the contribution margin per machine hour for Product G is $200 and Product B is $70.

Answer 14

To determine

Requirement-2:

To determine:

The number of units of Products G and Products B produced by the company and total contribution margin , if the company continues to operate with only one shift.

Expert Solution

Answer to Problem 5APSA

Solution:

WORKING PAPERS F/ FUND ACCOUNTING, Chapter 25, Problem 5APSA , additional homework tip 2

Explanation of Solution

Step-1:

The hours dedicated to the production of each product in single shift = 8 Hours * 22 Working Days

The hours dedicated to the production of each product in single shift = 176 hours

Step-2:

Calculation of Units produced for most profitable sales mix when the company continues

with single shift.

Units Produced for the most profitable sales mix is calculated by using the formula:

$H o u r s d e d i c a t e d t o t h e p r o d u c t i o n o f e a c h p r o d u c t / M a c h i n e h o u r s t o p r o d u c e 1 u n i t$

Therefore the units produced for the most profitable sales mix=176/0.4=440 units

Step-3:

Calculation of contribution margin:

The contribution margin is computed by using the formula below:

Units produced for the most profitable sales mix*Contribution margin per unit

Therefore the contribution margin of the product =440 units*$80=$35,200

Conclusion

Hence the total units produced will be 440 units if the company operates in single shift of 8 hours for 22 working days and its total contribution margin is $35,200.

Answer 15

To determine

Requirement-2:

To determine:

The number of units of Products G and Products B produced by the company and total contribution margin , if the company continues to operate with only one shift.

Answer 16

Expert Solution

Answer to Problem 5APSA

Solution:

WORKING PAPERS F/ FUND ACCOUNTING, Chapter 25, Problem 5APSA , additional homework tip 2

Answer 17

Expert Solution

Answer 18

Expert Solution

Answer 19

Expert Solution

Answer 20

Explanation of Solution

Step-1:

The hours dedicated to the production of each product in single shift = 8 Hours * 22 Working Days

The hours dedicated to the production of each product in single shift = 176 hours

Step-2:

Calculation of Units produced for most profitable sales mix when the company continues

with single shift.

Units Produced for the most profitable sales mix is calculated by using the formula:

$H o u r s d e d i c a t e d t o t h e p r o d u c t i o n o f e a c h p r o d u c t / M a c h i n e h o u r s t o p r o d u c e 1 u n i t$

Therefore the units produced for the most profitable sales mix=176/0.4=440 units

Step-3:

Calculation of contribution margin:

The contribution margin is computed by using the formula below:

Units produced for the most profitable sales mix*Contribution margin per unit

Therefore the contribution margin of the product =440 units*$80=$35,200

Answer 21

Conclusion

Hence the total units produced will be 440 units if the company operates in single shift of 8 hours for 22 working days and its total contribution margin is $35,200.

Answer 22

To determine

Requirement-3a:

To determine:

The number of units of Product G and B produced by the company and total contribution marginif the company adds another shift in addition to 8 hours.

Expert Solution

Answer to Problem 5APSA

Solution:

Below table shows the number of units produced by the company when it adds additional shift, total contribution margin in respect to change of shift.

WORKING PAPERS F/ FUND ACCOUNTING, Chapter 25, Problem 5APSA , additional homework tip 3

Explanation of Solution

Step-1:

Hours dedicated for the production of products is done based on the ratio of maximum sales unit and machine hours to produce each unit.

$H o u r s d e d i c a t e d f o r t h e p r o d u c t i o n o f P r o d u c t G = M a x i m u m u n i t s a l e s p e r m o n t h * M a c h i n e h o u r s t o p r o d u c e 1 u n i t$

Hours dedicated for the production of Product G= 600*0.4=240 hours

Total hours available after adding additional shift=22*16=352 hours

$H o u r s d e d i c a t e d f o r t h e p r o d u c t i o n o f P r o d u c t B = T o t a l h o u r s a v a i l a b l e - H o u r s d e d i c a t e d f o r t h e p r o d u c t i o n o f P r o d u c t G$

Hours dedicated for the production of Product B=352-240=112 hours

Step-2:

Calculation of Units produced for most profitable sales mix when the company adds additional shift:

Product G:

Units produced for most profitable sales mix =240/0.4=600 Units

Product B:

Units produced for most profitable sales mix =112/1=112 Units

$U n i t s p r o d u c e d f o r t h e m o s t p r o f i t a b l e s a l e s m i x = H o u r s d e d i c a t e d t o t h e p r o d u c t i o n o f e a c h u n i t / M a c h i n e h o u r s t o p r o d u c e 1 u n i t$

Step-3:

Calculation of Total Contribution Margin:

The contribution margin is computed by using the formula below:

$\begin{array}{l} U n i t s p r o d u c e d f o r t h e m o s t p r o f i t a b l e s a l e s m i x * C o n t r i b u t i o n m a r g i n p e r u n i t \end{array}$

Contribution Margin for Product G:

Units produced for the most profitable sales mix: 600 Units

Contribution margin per unit: $80

Therefore the contribution margin of Product G is 600 units*$80=$48,000.

Contribution Margin for Product B:

Units produced for the most profitable sales mix: 112 Units

Contribution margin per unit: $70

Therefore the contribution of Product B is 112 units*$70=$7,840.

$T o t a l c o n t r i b u t i o n m a r g i n = C o n t r i b u t i o n m a r g i n o f P r o d u c t G + C o n t r i b u t i o n m a r g i n o f P r o d u c t B$

Therefore the total contribution margin will be $48,000+$7,840=$55,840.

Answer 23

To determine

Requirement-3a:

To determine:

The number of units of Product G and B produced by the company and total contribution marginif the company adds another shift in addition to 8 hours.

Answer 24

Expert Solution

Answer to Problem 5APSA

Solution:

Below table shows the number of units produced by the company when it adds additional shift, total contribution margin in respect to change of shift.

WORKING PAPERS F/ FUND ACCOUNTING, Chapter 25, Problem 5APSA , additional homework tip 3

Answer 25

Expert Solution

Answer 26

Expert Solution

Answer 27

Expert Solution

Answer 28

Explanation of Solution

Step-1:

Hours dedicated for the production of products is done based on the ratio of maximum sales unit and machine hours to produce each unit.

$H o u r s d e d i c a t e d f o r t h e p r o d u c t i o n o f P r o d u c t G = M a x i m u m u n i t s a l e s p e r m o n t h * M a c h i n e h o u r s t o p r o d u c e 1 u n i t$

Hours dedicated for the production of Product G= 600*0.4=240 hours

Total hours available after adding additional shift=22*16=352 hours

$H o u r s d e d i c a t e d f o r t h e p r o d u c t i o n o f P r o d u c t B = T o t a l h o u r s a v a i l a b l e - H o u r s d e d i c a t e d f o r t h e p r o d u c t i o n o f P r o d u c t G$

Hours dedicated for the production of Product B=352-240=112 hours

Step-2:

Calculation of Units produced for most profitable sales mix when the company adds additional shift:

Product G:

Units produced for most profitable sales mix =240/0.4=600 Units

Product B:

Units produced for most profitable sales mix =112/1=112 Units

$U n i t s p r o d u c e d f o r t h e m o s t p r o f i t a b l e s a l e s m i x = H o u r s d e d i c a t e d t o t h e p r o d u c t i o n o f e a c h u n i t / M a c h i n e h o u r s t o p r o d u c e 1 u n i t$

Step-3:

Calculation of Total Contribution Margin:

The contribution margin is computed by using the formula below:

$\begin{array}{l} U n i t s p r o d u c e d f o r t h e m o s t p r o f i t a b l e s a l e s m i x * C o n t r i b u t i o n m a r g i n p e r u n i t \end{array}$

Contribution Margin for Product G:

Units produced for the most profitable sales mix: 600 Units

Contribution margin per unit: $80

Therefore the contribution margin of Product G is 600 units*$80=$48,000.

Contribution Margin for Product B:

Units produced for the most profitable sales mix: 112 Units

Contribution margin per unit: $70

Therefore the contribution of Product B is 112 units*$70=$7,840.

$T o t a l c o n t r i b u t i o n m a r g i n = C o n t r i b u t i o n m a r g i n o f P r o d u c t G + C o n t r i b u t i o n m a r g i n o f P r o d u c t B$

Therefore the total contribution margin will be $48,000+$7,840=$55,840.

Answer 29

To determine

Requirement-3b:

To discuss:

The company whether to prefer adding new shift in addition to existing single shift of 8 hours.

Expert Solution

Answer to Problem 5APSA

Solution:

Yes, the company should add the new shift in addition to the existing shift of 8 hours.

Explanation of Solution

Increase in additional shift of 8 hours per day promotes the increase in productivity of the Edgerron Company to 712 Units compared to productivity of 440 units when it operates in single shift.

Answer 30

To determine

Requirement-3b:

To discuss:

The company whether to prefer adding new shift in addition to existing single shift of 8 hours.

Answer 31

Expert Solution

Answer to Problem 5APSA

Solution:

Yes, the company should add the new shift in addition to the existing shift of 8 hours.

Answer 32

Expert Solution

Answer 33

Expert Solution

Answer 34

Expert Solution

Answer 35

Explanation of Solution

Increase in additional shift of 8 hours per day promotes the increase in productivity of the Edgerron Company to 712 Units compared to productivity of 440 units when it operates in single shift.

Answer 36

To determine

Requirement-4:

To discuss:

The company whether to pursue the marketing strategy by spending $12,000 additional costs to increase the maximum sales to 700 units of Product G by doubling the shift.

Expert Solution

Answer to Problem 5APSA

Solution:

No, the company should not pursue this marketing strategy with additional costs as this leads to the operating loss of the company.

Explanation of Solution

Below table shows the calculation for products by doubling the shifts and increasing the marketing costs by $12,000 to increase the maximum sales to 700 units.

WORKING PAPERS F/ FUND ACCOUNTING, Chapter 25, Problem 5APSA , additional homework tip 4

$H o u r s d e d i c a t e d f o r t h e p r o d u c t i o n o f P r o d u c t G = M a x i m u m u n i t s a l e s p e r m o n t h * M a c h i n e h o u r s t o p r o d u c e 1 u n i t$

Hours dedicated for the production of Product G= 700*0.4=280 hours

Total hours available after adding additional shift=22*16=352 hours

$H o u r s d e d i c a t e d f o r t h e p r o d u c t i o n o f P r o d u c t B = T o t a l h o u r s a v a i l a b l e - H o u r s d e d i c a t e d f o r t h e p r o d u c t i o n o f P r o d u c t G$

Hours dedicated for the production of Product B=352-280=72 hours

Conclusion

Thereis an operating loss of sales mix for the company of $21,800 and hence the idea of doubling the shift and spending additional costs for marketing to increase sales is not advisable to the management to proceed with.

Answer 37

To determine

Requirement-4:

To discuss:

The company whether to pursue the marketing strategy by spending $12,000 additional costs to increase the maximum sales to 700 units of Product G by doubling the shift.

Answer 38

Expert Solution

Answer to Problem 5APSA

Solution:

No, the company should not pursue this marketing strategy with additional costs as this leads to the operating loss of the company.

Answer 39

Expert Solution

Answer 40

Expert Solution

Answer 41

Expert Solution

Answer 42

Explanation of Solution

Below table shows the calculation for products by doubling the shifts and increasing the marketing costs by $12,000 to increase the maximum sales to 700 units.

WORKING PAPERS F/ FUND ACCOUNTING, Chapter 25, Problem 5APSA , additional homework tip 4

$H o u r s d e d i c a t e d f o r t h e p r o d u c t i o n o f P r o d u c t G = M a x i m u m u n i t s a l e s p e r m o n t h * M a c h i n e h o u r s t o p r o d u c e 1 u n i t$

Hours dedicated for the production of Product G= 700*0.4=280 hours

Total hours available after adding additional shift=22*16=352 hours

$H o u r s d e d i c a t e d f o r t h e p r o d u c t i o n o f P r o d u c t B = T o t a l h o u r s a v a i l a b l e - H o u r s d e d i c a t e d f o r t h e p r o d u c t i o n o f P r o d u c t G$

Hours dedicated for the production of Product B=352-280=72 hours

Answer 43

Conclusion

Thereis an operating loss of sales mix for the company of $21,800 and hence the idea of doubling the shift and spending additional costs for marketing to increase sales is not advisable to the management to proceed with.

Answer 44

Ch. 25 - Prob. 1DQ Ch. 25 - What is capital budgeting?Ch. 25 - Prob. 3DQ Ch. 25 - Prob. 4DQ Ch. 25 - Prob. 5DQ Ch. 25 - Prob. 6DQ Ch. 25 - Prob. 7DQ Ch. 25 - Prob. 8DQ Ch. 25 - Prob. 9DQ Ch. 25 - Prob. 10DQ

Concept explainers

Videos

Answer to Problem 5APSA

Explanation of Solution

Requirement-2:

To determine:

The number of units of Products G and Products B produced by the company and total contribution margin , if the company continues to operate with only one shift.

Answer to Problem 5APSA

Explanation of Solution

Requirement-3a:

To determine:

The number of units of Product G and B produced by the company and total contribution marginif the company adds another shift in addition to 8 hours.

Answer to Problem 5APSA

Explanation of Solution

Requirement-3b:

To discuss:

The company whether to prefer adding new shift in addition to existing single shift of 8 hours.

Answer to Problem 5APSA

Explanation of Solution

Requirement-4:

To discuss:

The company whether to pursue the marketing strategy by spending $12,000 additional costs to increase the maximum sales to 700 units of Product G by doubling the shift.

Answer to Problem 5APSA

Explanation of Solution

Want to see more full solutions like this?

Chapter 25 Solutions

Concept explainers

Videos

Answer to Problem 5APSA

Explanation of Solution

Requirement-2: To determine: The number of units of Products G and Products B produced by the company and total contribution margin , if the company continues to operate with only one shift.

Answer to Problem 5APSA

Explanation of Solution

Requirement-3a: To determine: The number of units of Product G and B produced by the company and total contribution marginif the company adds another shift in addition to 8 hours.

Answer to Problem 5APSA

Explanation of Solution

Requirement-3b: To discuss: The company whether to prefer adding new shift in addition to existing single shift of 8 hours.

Answer to Problem 5APSA

Explanation of Solution

Requirement-4: To discuss: The company whether to pursue the marketing strategy by spending $12,000 additional costs to increase the maximum sales to 700 units of Product G by doubling the shift.

Answer to Problem 5APSA

Explanation of Solution

Want to see more full solutions like this?

Chapter 25 Solutions

Requirement-2:

To determine:

The number of units of Products G and Products B produced by the company and total contribution margin , if the company continues to operate with only one shift.

Requirement-3a:

To determine:

The number of units of Product G and B produced by the company and total contribution marginif the company adds another shift in addition to 8 hours.

Requirement-3b:

To discuss:

The company whether to prefer adding new shift in addition to existing single shift of 8 hours.

Requirement-4:

To discuss:

The company whether to pursue the marketing strategy by spending $12,000 additional costs to increase the maximum sales to 700 units of Product G by doubling the shift.