Question

Edgerron Company is able to produce two products, and with the same machine in its factory. The following information is available Products Selling price per unit Variable costs per unit Contribution margin per unit Machine hours to produce unit Maximum unit sales per month 55 $ 85 0.4 hours 50 units Products $ 170 182 $ 68 1.6 hours 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 $8.500 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 G Product B 85.001s Contribution margin perunt 6800 04 10 Machine hours per unit $ 6800 Contribution margin per machine hour Product G Product B 500 200 Maximum number of units to be sold 200 Hours required to produce maximum units Total < Prev 12 of 12 Nord

Answer 1

1)	Product G	Product B
Contribution margin per unit (a)	$85	$68
Machine hours per unit (b)	0.4	1.0
Contribution margin per machine hour (c = a*b)	$34.00	$68.00	Total
Maximum number of units to be sold (d)	500	200	700
Hours required to produce maximum units (e ) (0.4*500); (1*200)	200	200	400
Ranking	2	1
Product B has more contribution margin per machine hour than Product G so it is suggested to produce Product B first than Product G.