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 $ 420 $ 245 Costs Direct materials 90 45 Direct labor (@ $25/hr.) 100 50 Variable factory overhead* 90 50 Fixed factory overhead* 35 25 Marketing costs (all fixed) 25 20 Total costs $ 340 $ 190 Operating profit $ 80 $ 55 *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.)
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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 | $ | 420 | $ | 245 | ||
| Costs | ||||||
| Direct materials | 90 | 45 | ||||
| Direct labor (@ $25/hr.) | 100 | 50 | ||||
| Variable factory overhead* | 90 | 50 | ||||
| Fixed factory overhead* | 35 | 25 | ||||
| Marketing costs (all fixed) | 25 | 20 | ||||
| Total costs | $ | 340 | $ | 190 | ||
| Operating profit | $ | 80 | $ | 55 | ||
*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.)
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