Question: Controller Incorporated produces two basic types of video games, Clash and Slash. Pertinent data follow (DLH = direct labor hour): Clash Slash Sales price (per

Controller Incorporated produces two basic types of video games, Clash and Slash. Pertinent data follow (DLH = direct labor hour):

Clash Slash
Sales price (per unit) $ 390 $ 318
Costs (per unit):
Direct materials 82 46
Direct labor 66 90
Variable factory overhead (@ $15 per DLH) 60 30
Allocated fixed factory overhead (based on DLHs) 24 12
Marketing expenses (all variable) 50 39
Total costs 282 217
Operating income (per unit) $ 108 $ 101

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?

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