Question
Selection of the Most Profitable Product DVD Production Company produces two basic types of video games, Flash and Clash. Pertinent data for DVD Production Company
Selection of the Most Profitable Product DVD Production Company produces two basic types of video games, Flash and Clash. Pertinent data for DVD Production Company follow: | |
Flash | Clash | |||
Sales price | $ | 250 | $ | 140 |
Costs | ||||
Direct materials | 50 | 25 | ||
Direct labor ($50/hr.) | 100 | 50 | ||
Variable factory overhead* | 50 | 25 | ||
Fixed factory overhead* | 20 | 10 | ||
Marketing costs (all fixed) | 10 | 10 | ||
Total costs |
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$ | 230 | $ | 120 | |
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Operating profit | $ | 20 | $ | 20 |
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*Based on labor-hours: 2 DLHs per unit of Flash, and 1 DLH per unit of Clash.
The DVD game craze is at its height so that either Flash or Clash alone can be sold to keep the plant operating at full capacity. However, labor capacity in the plant is insufficient to meet the combined demand for both games. Flash and Clash are processed through the same production departments. | |
Required: | |
2a. | Calculate the contribution margin per labor hour for both Flash and Clash. (Enter all amounts as positive values.) |
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