How much is the contribution margin per DLH

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Reference no: EM132845752

Question - Zap Video Inc. produces two basic types of video games, Clash and Slash. Pertinent data follow (DLH = direct labor hour):

 

Clash

Slash

Sales price (per unit)

$360

$288

Costs (per unit): Direct materials

79

43

Direct labor

60

84

Variable factory overhead (@ $15 per DLH)

60

30

Allocated fixed factory overhead (based on DLHs)

24

12

Marketing expenses (all variable)

47

36

Total costs

270

205

Operating income (per unit)

$90

$83

There is insufficient labor capacity (i.e., DLHs) in the plant to meet the combined demand for both Clash and Slash.

Both products are produced through the same production departments.

In view of the labor shortage, which of the two products is most profitable, and how much is the contribution margin, per DLH?

Reference no: EM132845752

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