Problem 10-5A Analysis of sales mix strategies LO A1 Edgerron Company is able to

Question

Problem 10-5A Analysis of sales mix strategies LO A1 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 $140 Product B $ 170 102 Selling price per unit Variable costs per unit Contribution margin per unit Machine hours to produce 1 unit Maximum unit sales per month $ 85 0.4 hours 500 units $ 68 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 $8,500 additional fixed costs per month. (Round hours per unit answers to 1 decimal place. Enter operating losses, if any, as negative values.)

Explanation / Answer

1) product G product B Contribution margin per unit 85 68 machine hours per unit 0.4 1 contribution margin per machine hour 212.5 68 product G product B total Maximum number of units to be sold 500 200 hours required to produce maximum units 200 200 400 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 85 total contribution margin - one shift 37400 37,400 3) product G product B total hours dedicated to the production of each product 200 152 352 units produced for most profitable sales mix 500 152 contribution margin per unit 85 68 total contribution margin-two shifts 42500 10336 52836 contribution margin -one shifts 37,400 change in contribution margin 15,436 change in fixed costs 8,500 change in operating income (loss) 6,936 should the company pursue marketing campaign yes 4) product G product B total hours dedicated to the production of each product 240 112 352 units produced for most profitable sales mix 60 112 contribution margin per unit 85 68 total contribution margin-two shifts & marketing campaogn 5100 7616 12716 contribution margin -two shifts without marketing ca 52,836 change in contribution margin -40,120 Additional marketing costs 7,500 change in fixed costs 8,500 change in operating income (loss) -56,120 should the company pursue marketing campaign No

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