Reference no: EM133000796

DVD Production Company produces two basic types of video games, Flash and Clash. Pertinent data for DVD Production Company follow:

                                                            Flash                       Clash

Sales price                                   $340                       $190

Costs Direct materials                       70                               5

Direct labor (@ $25/hr.)                      100                             50

Variable factory overhead                       70                        50

Fixed factory overhead                          40                          30

Marketing costs (all fixed)                      30                            25

Total costs                                          $310                         $160

Operating profit                                         $30                          $30

• 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:

Problem 1: Calculate the contribution margin per labor hour for both Flash and Clash.