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 G					Product B
Selling price per unit			$	132				$	160
Variable costs per unit				50					96
Contribution margin per unit			$	82				$	64
Machine hours to produce 1 unit		0.4	hours				1.0	hours
Maximum unit sales per month		600	units				150	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 $8,000 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
Selling price per unit			$	132				$	160
Variable costs per unit				50					96
Contribution margin per unit			$	82				$	64
Machine hours to produce 1 unit		0.4	hours				1.0	hours
Maximum unit sales per month		600	units				150	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 $8,000 additional fixed costs per month. (Round hours per unit answers to 1 decimal place. Enter operating losses, if any, as negative values.)

Answer 1

1						product G	product B
	Contribution margin per unit					82	64
	machine hours per unit					0.4	1
	contribution margin per machine hour					205	64
						product G	product B	total
	Maximum number of units to be sold					600	150
	hours required to produce maximum units					240	150	390
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					82
	total contribution margin - one shift					36080		36,080
3)						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					82	64
	total contribution margin-two shifts					49200	7168	56368
	contribution margin -one shifts							36,080
	change in contribution margin							20,288
	change in fixed costs							8,000
	change in operating income (loss)							12,288
	should the company pursue marketing campaign					yes