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

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.

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?

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?

Garrison 15e Recheck 2014-12-31

Outdoor Luggage Inc. makes high-end hard-sided luggage for sports equipment. Data concerning three of the company’s most popular models appear below.

Explanation / Answer

1a. Ski Guard Golf Guard Fishing Guard Selling price per unit $260 $330 $205 Less: Variable cost per unit ($120) ($180) ($135) Contribution margin per unit (a) $140 $150 $70 Plastic injection molding machine processing time required to produce one unit (b) (minutes) 9.00 12.00 11.00 Contribution margin per unit of the constrained resource (a) ÷ (b) (per minute) $15.56 $16.67 $7.78 Per minute b. Golf Guard would be most profitable use of this constraint c. Fishing Guard would be the least profitable use of this constraint 2a Ski Guard Golf Guard Fishing Guard Selling price per unit $260 $330 $205 Less: Variable cost per unit ($120) ($180) ($135) Contribution margin per unit (a) $140 $150 $70 Pounds of plastic pellets required to produce one unit (b) 12.00 7.00 11.00 Contribution margin per unit of the constrained resource (a) ÷ (b) (per minute) $11.67 $21.43 $6.36 Per Pound b. Golf Guard would be most profitable use of this constraint c. Fishing Guard would be the least profitable use of this constraint 3) Golf Guard has the largest unit contribution margin but it is not the most profitable use of the constrained resource in either case above.

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