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Category > Business & Finance Posted 29 May 2017 My Price 7.00

Ortiz Company is able to produce two products, G and B, with the same machine in its factory

 

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     $ 180         $ 200    
Variable costs per unit       20           110    
     
       
   
Contribution margin per unit     $ 160         $ 90    
     
       
   
Machine hours to produce 1 unit   0.8 hours       4.0 hours    
Maximum unit sales per month   400 units       450 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 $7,000 additional fixed costs per month.

Required:
1.

Determine the contribution margin per machine hour that each product generates. (Round your final answers to the nearest dollar amount. Omit the "$" sign in your response.)

  Product G Product B
Contribution margin per machine hour $ $

2(a)

How many units of Product G and Product B should the company produce if it continues to operate with only one shift? (Leave no cells blank - be certain to enter "0" wherever required.)

     
Product G   units
Product B   units
2(b)

How much total contribution margin does this mix produce each month? (Omit the "$" sign in your response.)

Total contribution margin $

3(a) If the company adds another shift, how many units of Product G and Product B should it produce?

     
Product G   units
Product B   units

3(b)

How much total contribution margin would this mix produce each month? (Amounts to be deducted should be indicated with a minus sign. Omit the "$" sign in your response.)

   
Product G $
Product B  
extra shift costs  
 
Total contribution margin $
 

3(c) Should the company add the new shift?
   
 
  No
  Yes

4(a)

Suppose that the company determines that it can increase Product G's maximum sales to 440 units per month by spending $1,800 per month in marketing efforts, how many units of Product G and Product B should it produce? (Leave no cells blank - be certain to enter "0" wherever required.)

     
Product G   units
Product B   units

4(b)

How much total contribution margin would this mix produce each month? (Leave no cells blank - be certain to enter "0" wherever required. Amounts to be deducted should be indicated with a minus sign. Omit the "$" sign in your response.)

   
Product G $
Product B  
extra shift costs  
extra marketing costs  
 
Total contribution margin $
 

4(c) Should the company pursue this strategy and the double shift?
   
 
  Yes
  No
 
 

Answers

Alpha Geek
(8)
Status NEW Posted 29 May 2017 11:05 AM My Price 7.00

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Attachments

file 1496056393-Answer.docx preview (204 words )
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