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 $ 80 48 $ 50 Selling price per unit Variable costs per unit 10 $ 40 Contribution margin per unit 32 Machine hours to produce 1 unit Maximum unit sales per month 0.4 hours 600 units 1.0 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 $4,000 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 G Product B Contribution margin per unit $ $ 40.00 32.00 Machine hours per unit 0.4 1.0 32.00 $ Contribution margin per machine hour Product G Product B Total Maximum number of units to be sold 600 200 Hours required to produce maximum units

Answer 1

Contribution margin per unit Machine hours per unit Contribution margin per machine hour Product G Product B $40 $32 0. 41 $100 $32 Product G Product B Total 600 200 Maximum number of units to be sold Hours required to produce maximum units: Product G: 600x0.40 = 240; Product B: 200x1 = 200 240 200 440