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 Sk Guard Golf Guard Fishing Guard Selling price per unit Variable cost per unit Plastic injection molding machine processing 280 $ 90 $ 200 $ 160 $ 245 115 2 minutes 8 pounds 6 minutes 14 minutes time required to produce one unit Pounds of plastic pellets per unit 12 pounds 1 pounds 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

Contribution margin per minute :

Contribution margin per pound :

Ski guard Gold guard Fishing guard Selling price per unit 280 200 245 Variable cost per unit 90 160 115 Contribution margin per unit 190 40 130 Minute per unit 6 14 2 Contribution margin per minute 31.67 2.86 65

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