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 Selling price per unit Variable cost per unit Plastic injection molding machine processing 260 $ 120 $ 330 $ 180 $ 205 135 9 minutes 12 minutes 11 minutes 12 pounds15 pounds 11 pounds time required to produce one unit Pounds of plastic pellets 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 Ski guard Golf guard Fishing guard Selling price per unit 260 330 205 Variable cost per unit 120 180 135 Contribution margin per unit 140 150 70 Plastic injection molding machine processing time required to produce one unit 9 12 11 Contribution margin per unit of the constrained resource 15.56 12.50 6.36 2 Ski guard 3 Ski guard Golf guard Fishing guard Selling price per unit 260 330 205 Variable cost per unit 120 180 135 Contribution margin per unit 140 150 70 Pounds of plastic pellets required to produce one unit 12 15 11 Contribution margin per unit of the constrained resource 11.67 10.00 6.36 4 Ski guard 5 Golf guard

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