Analysis of sales mix strategies
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 $ 220 $ 220
Variable costs per unit 60 70
Contribution margin per unit $ 160 $ 150
Machine hours to produce 1 unit 0.4hours 4.0 hours
Maximum unit sales per month 840 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 $6,400 additional fixed costs per month.
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?
If the company adds another shift, how many units of Product G and Product B should it produce?
I am confused with these question,as I alreaady calculated the Contribution margin per machine hour, but can't figure out about units of Product G and B, any idea or any guess, please help.
Comment on Just Looking's post
I found that the contribution margin per hour machine is 400 for product G and for product B it is 37.5, but what is the next step I should take to exactly find how many units it can produce. Will be very thankful for your help.
Comment on Just Looking's post
Thanks for your help,I was able to find out how many units of product G can be produced,but can't find the units for Product B if it adds another shift. Plus how I calculate the extra shift cost.
Comment on Just Looking's post
Thanks for your help, Yes,now I am able to figureout the units of product B. I think I will need to calculate the extra cost to find out the total contribution of this mix. I came up with 840 units of Product G and 4 for Product B. How much total contribution margin would this mix produce each month?
Comment on Just Looking's post
Can you please help me to figure out the fixed cost for this question.
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