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12 October, 11:01

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

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  1. 12 October, 11:13
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    Android Bio-Mutant Cyclops

    Direct labor per unit 48 24 60

    Divide by Direct labor rate 12 12 12

    Direct labor hours per unit 4 2 5

    Android Bio-Mutant Cyclops

    Selling price 100 77 125

    Less: Variable costs

    Direct labor 48 24 60

    Direct materials 9 8 16

    Variable overhead 7 4 9

    Total Variable costs 64 36 85

    Unit Contribution margin 36 41 40

    Divide by Direct labor hours per unit 4 2 5

    Contribution margin per labor hour 9.00 20.50 8.00

    As shown in the above estimates, producing Bio-mutant is much more lucrative

    Total contribution margin 20500 = 1000 * 20.5
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