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 nformation is available uct Selling price per unit Veriable costs per unit Contribution margin per unit Machine hours to produce 1 unit Maximum unit sales per nonth s 210 126 $ 84 e.4 hours1.0 hours 558 units 20 units s 188 75 s 105 e company presenty operates the machine for a single elght hour shift for 22 working days each month Managementis thinking per month about operating the machine for two shifts which will incredse ss productivity by snother eight hours per day for 22 days This change would recure $10,500 additiondi fixed costs per monn (Round hours per unit answers operating losses, if any, as negative values to 1 decimel place. Enter 1 Determine the contribution margin per machine hour teat each produet cenerates Product G Contrioution margin per unit Contripution margin per machine hour Product B Product e

Explanation / Answer

1.

Contribution p.u

$105

$84

Hrs p.u

0.4 hrs

1.0 hrs

Contribution per hr

$262.50

$84

Maximum sales

550

200

Hours required

220

200

420

2. Since contribution per hour is more in case of product G, the production of this product should be maximized.

3. In case of double shift working

Hours available=22*8*2=352 hours

4. After marketing strategy is applied

Company should not opt for marketing strategy since gain in point 4 has declined.

Whereas company should work on double shift as income has increased from $46200 to $58338.

Do give your feedback!! Happy Learning :)

G B Total

Contribution p.u

$105

$84

Hrs p.u

0.4 hrs

1.0 hrs

Contribution per hr

$262.50

$84

Maximum sales

550

200

Hours required

220

200

420

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