Outdoor Luggage Inc. makes high-end hard-sided luggage for sports equipment. Dat
ID: 2477273 • 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. Ski Guard Golf Guard Fishing Guard Selling price per unit $290 $390 $195 Variable cost per unit $160 $200 $105 Plastic injection molding machine processing time required to produce one unit 12 minutes 6 minutes 8 minutes Pounds of plastic pellets per unit 10 pounds 13 pounds 9 pounds Required: 1a. The total time available on the plastic injection molding machine is the constraint in the production process. What is the contribution margin per unit of the constrained resources for Ski Guard, Golf Guard and Fishing Guard? 1b. Which product would be the most profitable use of this constraint? Golf Guard Ski Guard Fishing Guard 1c. Which product would be the least profitable use of this constraint? Golf Guard Ski Guard Fishing Guard 2a. A severe shortage of plastic pellets has required the company to cut back its production so much that the plastic injection molding machine is no longer the bottleneck. Instead, the constraint is the total available pounds of plastic pellets. What is contribution margin per unit of the constrained resources for Ski Guard, Golf Guard and Fishing Guard? 2b. Which product would be the most profitable use of this constraint? Golf Guard Fishing Guard Ski Guard 2c. Which product would be the least profitable use of this constraint? Golf Guard Fishing Guard Ski Guard 3. Which product has the largest unit contribution margin? Golf Guard Fishing Guard Ski Guard
Explanation / Answer
Outdoor Lauggage Inc Details Ski Guard Golf Guard Fishing Guard Unit Selling Price 290 390 195 Unit Variable Cost 160 200 105 m Contribution Margin per unit 130 190 90 n Plastic Injection molding processing time in minutes 12 6 8 o Pounds of plastic pellets per unit 10 13 9 1a Contribution margin per minute of time in injection molding machine=m/n= $ 10.83 $ 31.67 $ 11.25 1b Golf Guard is the most profitable use. 1c. Ski Guard is the least profitable use. 2a Contribution margin per pound of plastic pellets=m/o= $ 13.00 $ 14.62 $ 10.00 2b Golf Guard will be the most profitable use. 2c. Fishing Guard is the least profitable use. 3 Golf Guard has the largest unit contribution margin.
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