Product G Product B Selling price per unit. $120 $160 Variable costs per unit . 40 $ 80 0.4 hour 90 $ 70 1.0 hours Contribution margin per unit Machine hours to produce 1 unit. Maximum unit sales per month . 600 units 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 $15,000 additional fixed costs per month. Required 1. Determine the contribution margin per machine hour that each product generates. 2. How many units of Product G and Product B should the company produce if it continues to operate with only one shift? How much total contribution margin does this mix produce each month? 3. If the company adds another shift, how many units of Product G and Product B should it produce? How much total incremental income would this mix produce each month? Should the company add the new shift? 4. Suppose the company determines that it can increase Product G's maximum sales to 700 units per month by spending $12,000 per month in marketing efforts. Should the company pursue this strategy and the double shift? Compute total incremental income.
Product G Product B Selling price per unit. $120 $160 Variable costs per unit . 40 $ 80 0.4 hour 90 $ 70 1.0 hours Contribution margin per unit Machine hours to produce 1 unit. Maximum unit sales per month . 600 units 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 $15,000 additional fixed costs per month. Required 1. Determine the contribution margin per machine hour that each product generates. 2. How many units of Product G and Product B should the company produce if it continues to operate with only one shift? How much total contribution margin does this mix produce each month? 3. If the company adds another shift, how many units of Product G and Product B should it produce? How much total incremental income would this mix produce each month? Should the company add the new shift? 4. Suppose the company determines that it can increase Product G's maximum sales to 700 units per month by spending $12,000 per month in marketing efforts. Should the company pursue this strategy and the double shift? Compute total incremental income.
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter13: The Balanced Scorecard: Strategic-based Control
Section: Chapter Questions
Problem 8E: Hatch Manufacturing produces multiple machine parts. The theoretical cycle time for one of its...
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Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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Question
Edgerron Company is able to produce two products, G and B, with the same machine in its factory. The following information is available.
Transcribed Image Text:Product G
Product B
Selling price per unit.
$120
$160
Variable costs per unit .
40
$ 80
0.4 hour
90
$ 70
1.0 hours
Contribution margin per unit
Machine hours to produce 1 unit.
Maximum unit sales per month .
600 units
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 $15,000 additional fixed
costs per month.
Transcribed Image Text:Required
1. Determine the contribution margin per machine hour that each product generates.
2. How many units of Product G and Product B should the company produce if it continues to operate
with only one shift? How much total contribution margin does this mix produce each month?
3. If the company adds another shift, how many units of Product G and Product B should it produce?
How much total incremental income would this mix produce each month? Should the company add
the new shift?
4. Suppose the company determines that it can increase Product G's maximum sales to 700 units per
month by spending $12,000 per month in marketing efforts. Should the company pursue this strategy
and the double shift? Compute total incremental income.
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