Fundamental Accounting Principles 22th Edition by John Wild ,Ken Shaw,Barbara Chiappetta

Exercise 12

Sung Company is able to produce two products, R and T, with the same machine in its factory. The following information is available.

Required
1. Determine the contribution margin per machine hour that each product generates.
2. How many units of Product R and Product T 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 R and Product T should it produce How much total contribution margin would this mix produce each month Should the company add the new shift Explain.
4. Suppose that the company determines that it can increase Product R's maximum sales to 675 units per month by spending $4,500 per month in marketing efforts. Should the company pursue this strategy and the double shift Explain.