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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 $ 230 $ 260 Variable costs per unit 100 156 Contribution margin per unit $ 130 $ 104 Machine hours to produce 1 unit 0.4 hours 1.0 hours Maximum unit sales per month 650 units 250 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 $13,000 additional fixed costs per month. (Round hours per unit answers to 1 decimal place. Enter operating losses, if any, as negative values.)

1. Determine the contribution margin per machine hour that each product generates.

Product GProduct B

Contribution margin per unit$130.00$104.00

Machine hours per unit0.41.0

Contribution margin per machine hour$325.00$104.00Product GProduct BTotal

Maximum number of units to be sold650250

Hours required to produce maximum units2602505102.

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 BTotal

Hours dedicated to the production of each product1760176

Units produced for most profitable sales mix4400

Contribution margin per unit$130.00$0.00

Total contribution margin - one shift$57,200$57,2003.

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?

Product GProduct BTotal

Hours dedicated to the production of each product26092352

Units produced for most profitable sales mix65092

Contribution margin per unit$130.00$104.00

Total contribution margin - two shifts$84,500$9,568$94,068

Total contribution margin - one shift57,200

Change in contribution margin36,868

Change in fixed costsYes4.

Suppose that the company determines that it can increase Product Gs maximum sales to 700 units per month by spending $12000 per month in marketing efforts. Should the company pursue this strategy and the double shift?Product GProduct BTotal

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 campaignNo

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