Outdoor Luggage, Inc., makes high-end hard-sided luggage for sports equipment. D

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 200 $ 60 $ 300 140 $ 255 Selling price per unit Variable cost per unit Plastic injection molding machine processing time required to 2 minutes 5 minutes 4 minutes produce one unit Pounds of llets per unit 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?

Explanation / Answer

1.

2.

Ski Guard (contribution margin per minute is higher)

3.

4.

Golf Guard (contribution margin per pound is higher)

5.

Fishing Guard

Ski Guard Golf Guard Fishing Guard Selling price per unit 200 300 255 Variable cost per unit 60 140 55 Contribution margin per unit 140 160 200 Plastic injection molding machine processing time required to produce one unit 2 minutes 5 minutes 4 minutes Contribution margin per minute 70 32 50

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