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 Fishing Guard Guard Selling price per unit Variable cost per unit Plastic injection molding machine processing 210 310 $ 150 $ 265 70 $ 130 10 minutes 6 pounds 8 minutes 10 minutes to produce one unit time required Pounds of plastic pellets per unit 7 pounds 16 pound:s 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

Ans. Calculation of Contribution margin per minute plastic injection molding mchine earned by each product

                                                                  Evaluation statement

                                             Saki Guard             Golf Guard               Fishing Guard

SP                                          $210     $310 $265

Variable cost                            $70                        $150                         $130

Contribution                             $140                       $160 $135

M .Machine time per unit           8m                        10m                           10m

Contribution per M. machine      $17.50                     $16                          $13.50

Minute

b. Product Saki Guard offer most profitable use of plastic injection modling machine

c. Calculation of Contribution margin per pounds of material (plastic Pellets) earned by each product

                                                                  Evaluation statement

                                             Saki Guard             Golf Guard               Fishing Guard

SP                                          $210     $310 $265

Variable cost                            $70                        $150                         $130

Contribution                             $140                       $160 $135

Plastic pellets pounds per unit   7                              16                              6

Contribution per Plastic pellet    $20                         $10                          $22.50

Pounds

d. Product Fishing Guard offer most profitable use of plastic pellets.

e. Product Golf Guard has the larges contribution margin per unit, contribution amt $160 per unit,

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