Question

Edgerron Company is able to produce two products, G and B, with the same machine in its factory. The following information is
Total contribution margin-one shift 0 $ 0 3. If the company adds another shift, how many units of Product G and Product B sho
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Answer #1

1)

Product G Product B
Contribution margin per unit       105.00         84.00
Machine hours per unit           0.40           1.00
Contribution margin per machine hour       262.50         84.00
Product G Product B Total
Maximum number of units to be sold       550.00       200.00
Hours required to produce maximum units       220.00       200.00 420.00

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 $     105.00
Total contribution margin - one shift $46,200.00 46,200.00

3)

Product G Product B Total
Hours dedicated to the production of each product          220.00        132.00        352.00
Units produced for most profitable sales mix          550.00        132.00
Contribution margin per unit          105.00          84.00
Total contribution margin - two shifts     57,750.00 11,088.00 68,838.00
Total contribution margin - one shift   46,200.00
Change in contribution margin 22,638.00
Change in fixed costs 10,500.00
Change in operating income (loss) 12,138.00
Should the company add another shift? Yes

4)

Product G Product B Total
Hours dedicated to the production of each product          240.00        112.00        352.00
Units produced for most profitable sales mix          600.00        112.00
Contribution margin per unit          105.00          84.00
Total contribution margin - two shifts and marketing campaign     63,000.00     9,408.00 72,408.00
Contribution margin - two shifts without marketing campaign 68,838.00
Change in contribution margin     3,570.00
Additional marketing costs     9,500.00
Change in fixed costs 10,500.00
Change in operating income (loss) -16,430.00
Should the company pursue the marketing campaign? No
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