Outdoor Luggage, Inc., makes high-end hard-sided luggage for sports equipment. D
ID: 2408787 • Letter: O
Question
Outdoor Luggage, Inc., makes high-end hard-sided luggage for sports equipment. Data concerning three of the company’s most popular models appear below.
Required:
1. If we assume that the total time available on the plastic injection molding machine is the constraint in the production process, how much contribution margin per minute of the constrained resource is earned by each product?
2. Which product offers the most profitable use of the plastic injection molding machine?
3. If we assume that a severe shortage of plastic pellets has required the company to cut back its production so much that its new constraint has become the total available pounds of plastic pellets, how much contribution margin per pound of the constrained resource is earned by each product?
4. Which product offers the most profitable use of the plastic pellets?
5. Which product has the largest contribution margin per unit?
SkiGuard Golf
Guard Fishing
Guard Selling price per unit $ 270 $ 350 $ 185 Variable cost per unit $ 155 $ 210 $ 65 Plastic injection molding machine processing
time required to produce one unit 7 minutes 9 minutes 12 minutes Pounds of plastic pellets per unit 11 pounds 15 pounds 13 pounds Ski Guard Golf Guard Fishing Guard Contribution margin per minute of the constrained resourceper minute n per minute
Explanation / Answer
Requirement - 1
Ski Guard
Golf Guard
Fishing Guard
Contribution margin per minute of the constrained resourse
$16.43 per minute
$15.56 per minute
$10 per minute
Ski Guard
Golf Guard
Fishing Guard
Selling price per unit
$270
$350
$185
Variable cost per unit
155
210
65
Contribution margin per unit
115
140
120
/ Constraint
7 minutes
9 minutes
12 minutes
Total
$16.43 per minute
$15.56 per minute
$10 per minute
Requirement – 2
“ Ski Guard ” product offers the most profitable use of the plastic injection molding machine”
Requirement – 3
Ski Guard
Golf Guard
Fishing Guard
Contribution margin per pound of the constrained resourse
$10.45 per pounds
$9.33 per pounds
$9.23 per pounds
Ski Guard
Golf Guard
Fishing Guard
Selling price per unit
$270
$350
$185
Variable cost per unit
155
210
65
Contribution margin per unit
115
140
120
/ Constraint
11 pounds
15 pounds
13 pounds
Total
$10.45 per pounds
$9.33 per pounds
$9.23 per pounds
Requirement – 4
“Ski Guard “ Product offers the most profitable use of the plastic pellets”
Requirement – 5
“Golf Guard “ product has the largest contribution margin per unit
= $140 per unit
Ski Guard
Golf Guard
Fishing Guard
Contribution margin per minute of the constrained resourse
$16.43 per minute
$15.56 per minute
$10 per minute
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