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 $ 310 $ 390 $ 215 Variable cost per unit $ 70 $ 160 $ 95 Plastic injection molding machine processing
time required to produce one unit 11 minutes 11 minutes 2 minutes Pounds of plastic pellets per unit 14 pounds 7 pounds 15 pounds

Explanation / Answer

1 Ski Guard Golf Guard Fishing Guard Selling price per unit 310 390 215 Less: Variable cost per unit 70 160 95 Contribution margin per unit 240 230 120 Plastic injection molding machine processing time per unit 11 11 2 Contribution margin per minute of the constrained resource 21.82 20.91 60 2 Fishing Guard 3 Ski Guard Golf Guard Fishing Guard Selling price per unit 310 390 215 Less: Variable cost per unit 70 160 95 Contribution margin per unit 240 230 120 Pounds of plastic pellets per unit 14 7 15 Contribution margin per minute of the constrained resource 17.14 32.86 8 4 Golf Guard 5 Ski Guard

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