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.

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?

Ski
Guard Golf
Guard Fishing
Guard Selling price per unit $ 260 $ 270 $ 305 Variable cost per unit $ 130 $ 130 $ 180 Plastic injection molding machine processing
time required to produce one unit 4 minutes 6 minutes 9 minutes Pounds of plastic pellets per unit 9 pounds 16 pounds 7 pounds

Explanation / Answer

1 Ski Guard Gold Guard Fishing Guard Selling price per unit $260 $270 $305 Variable cost per unit $130 $130 $180 Contribution margin per unit $130 $140 $125 Plastic injection molding machine processing time required to produce one unit 4 6 9 Contribution margin per unit of the constrained resource $32.50 $23.33 $13.89 2 Ski Guard 3 Ski Guard Gold Guard Fishing Guard Selling price per unit $260 $270 $305 Variable cost per unit $130 $130 $180 Contribution margin per unit $130 $140 $125 Pounds of plastic pellets required to produce one unit 9 16 7 Contribution margin per unit of the constrained resource $14.44 $8.75 $17.86 4 Fishing Guard 5 Gold Guard

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