Gunst Company produces three video games Android, Bio Mutant, and Cyclops Cost a

Question

Gunst Company produces three video games Android, Bio Mutant, and Cyclops Cost and reven data pertaining to each product are as follows 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 vvhich of its games to concentrate on next week in filling its backlog of orders Gunsrs direct labor rate is S12 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.)

Explanation / Answer

Android Bio Mutant Cyclops Selling Price 100 57 125 Less : Direct Labor 48 24 60 Direct Material 9 8 16 Variable overhead 7 4 9 Contribution per unit (A) 36 21 40 Number of hours required per unit (B) 4 2 5 Contribution per hour (A/B) 9 10.5 8 As contribution per hour is highest for Bio Mutant , the entire 1000 hours should be utilised in manufacturing Bio Mutant Number of units of Bio Mutant that can be produced in 1000 hours = 1000 / 2 = 500 units Total contribution margin = 500 * 21 = 10500

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