Academic Integrity: tutoring, explanations, and feedback — we don’t complete graded work or submit on a student’s behalf.

s able to produce two products, G and B, with the same machine in its factory. T

ID: 2596234 • Letter: S

Question

s able to produce two products, G and B, with the same machine in its factory. The following information is available. le costs per unit Contribution margin per unit Rachine hours to produce 1 unit Maximum unit sales per s 52 1.e hours 250 units s 65 e.4 hours 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 add fixed costs per month. (Round hours per unit answers to 1 decimal place. Enter 500 of units to be sold 129 AM

Explanation / Answer

1

Determine the contribution margin per machine hour that each product generates

Product G

Product B

Total

Contribution Margin per unit

65

52

Machine hours per unit

0.4 hours

1 hours

Contribution Margin per Machine hour

26

52

Product G

Product B

Maximum number of units to be sold

500 units

250 units

Hours required to produce maximum units

200

250

450

2

How many units Product G and Product B should the company if it continues to operate

Product G

Product B

Total

Hours dedicated to production of each product

176

176

Units produced for most profitable sales mix

450

Contribution Margin per unit

65

Total contribution Margin - one shift

29250

29250

3

If company adds another shift, how many of product G and product B should it produce?

Product G

Product B

Total

Hours dedicated to production of each product

200

152

352

Units produced for most profitable sales mix

500

152

Contribution Margin per unit

65

52

Total contribution Margin - two shift

32500

7904

40404

Total contribution Margin - one shift

29250

change in contribution Margin

11154

Change in fixed costs

6500

change in operating income (loss)

4654

Should the company add another shift

yes

4

Product G

Product B

Total

Hours dedicated to production of each product

240

112

352

Units produced for most profitable sales mix

600

112

Contribution Margin per unit

65

52

Total contribution Margin - two shift and marketing campaign

39000

5824

44824

Total contribution Margin - two shift With out marketing campaign

29250

change in contribution Margin

15574

Additional Marketing costs

5500

Change in fixed costs

6500

change in operating income (loss)

-3574

should compny pursue Marketing campaign

No

1

Determine the contribution margin per machine hour that each product generates

Product G

Product B

Total

Contribution Margin per unit

65

52

Machine hours per unit

0.4 hours

1 hours

Contribution Margin per Machine hour

26

52

Product G

Product B

Maximum number of units to be sold

500 units

250 units

Hours required to produce maximum units

200

250

450

2

How many units Product G and Product B should the company if it continues to operate

Product G

Product B

Total

Hours dedicated to production of each product

176

176

Units produced for most profitable sales mix

450

Contribution Margin per unit

65

Total contribution Margin - one shift

29250

29250

3

If company adds another shift, how many of product G and product B should it produce?

Product G

Product B

Total

Hours dedicated to production of each product

200

152

352

Units produced for most profitable sales mix

500

152

Contribution Margin per unit

65

52

Total contribution Margin - two shift

32500

7904

40404

Total contribution Margin - one shift

29250

change in contribution Margin

11154

Change in fixed costs

6500

change in operating income (loss)

4654

Should the company add another shift

yes

4

Product G

Product B

Total

Hours dedicated to production of each product

240

112

352

Units produced for most profitable sales mix

600

112

Contribution Margin per unit

65

52

Total contribution Margin - two shift and marketing campaign

39000

5824

44824

Total contribution Margin - two shift With out marketing campaign

29250

change in contribution Margin

15574

Additional Marketing costs

5500

Change in fixed costs

6500

change in operating income (loss)

-3574

should compny pursue Marketing campaign

No