Question

Short-Term Product-Mix Decision DVD Production Company produces two basic types of video games, Flash and Clash. Pertinent data for DVD Production Company follow: Flash Clash Sales price $ 400 $ 220 Costs Direct materials 90 45 Direct labor (@ $25/hr.) 100 50 Variable factory overhead* 90 50 Fixed factory overhead* 40 30 Marketing costs (all fixed) 30 25 Total costs $ 350 $ 200 Operating profit $ 50 $ 20 *Based on direct labor hours: 4 direct labor hours (DLHs) per unit of Flash and 2 DLHs 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. (Round your answers to 2 decimal places.)

Answer 1