Ortiz Company is able to produce two products, G and B, with the same machine in
ID: 2372532 • Letter: O
Question
Ortiz 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
$
120
$
160
Variable costs per unit
40
90
Contribution margin per unit
$
80
$
70
Machine hours to produce 1 unit
0.8
hours
2.0
hours
Maximum unit sales per month
400
units
350
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 $6,500 additional fixed costs per month.
How much total contribution margin would this mix produce each month?
Product G ?
Product B ?
extra shift costs ?
Total contribution margin ?
Ortiz Company is able to produce two products, G and B, with the same machine in its factory. The following information is available.
Explanation / Answer
when the shift is increased the production is doubled
hence machine G produces 2 units in 0.4 hours and machine B produces 2 units in 4 hours..
hence contribution margin per machine hour will be doubled since 2 machines are produced.. Hence contribution margin per machine hour for G is $240 and for B is $340
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