Question

Gunst Company produces three video games: Android, Bio-Mutant, and Cyclops. Cost and revenue data pertaining to each product are as follows.

	Android				Bio-Mutant				Cyclops
Selling price	$	100			$	75			$	125
Direct labor		48				24				60
Direct materials		9				8				16
Variable overhead		7				4				9

At the present time, demand for each of the company's products far exceeds its capacity to produce them. Thus, management is trying to determine which of its games to concentrate on next week in filling its backlog of orders. Gunst's direct labor rate is $12 per hour, and only 1,000 hours of direct labor are available each week.

Determine the maximum total contribution margin the company can make by its best use of the 1,000 available hours. (Do not round intermediate calculations.)

Answer 1

solution Particulars Andriod Bio-Mutant Cyclope A) selling price per unit B) Direct Labor per unit c) Direct Material per unit D) variable overhead per unit Contrebution per unit CA-B-C-o F) Direct Labour hours to produce | Iunit (B112 per hour) G) contribution per Direct Labour hour (E/F) H) Ranking of production 2 1 of these products on the basis of highest contribution per direct labour hour Therefore Gunst company should produce Bio - Mutant games in the Next week by uhusing 1000 labor hours available for the week. This would help the company rachleve the maximum conterbution possible. So, the maximum total contribution margin the company can make by its best use of 1000 available hours, = (Contribution per direct Labor hour for 1 unit of B10 - Mutant) x 1 (Available Labos hours) - 19.5 X 1000 => 19500