Outdoor Luggage, Inc., makes high-end hard-sided luggage for sports equipment. D
ID: 2535257 • Letter: O
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?
SkiGuard Golf
Guard Fishing
Guard Selling price per unit $ 240 $ 370 $ 225 Variable cost per unit $ 100 $ 255 $ 105 Plastic injection molding machine processing
time required to produce one unit 7 minutes 5 minutes 7 minutes Pounds of plastic pellets per unit 15 pounds 7 pounds 10 pounds
Explanation / Answer
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?
Ski Guard
Golf Guard
Fishing Guard
Selling price per unit
$240
$370
$225
Variable cost per unit
$100
$255
$105
Contribution margin per unit
$140
$115
$120
/ Constraint7
7 Minutes
5 Minutes
7 Minutes
Total
$20
$23
$17.14
2. Which product offers the most profitable use of the plastic injection molding machine?
“Golf Guard 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?
Ski Guard
Golf Guard
Fishing Guard
Selling price per unit
$240
$370
$225
Variable cost per unit
$100
$255
$105
Contribution margin per unit
$140
$115
$120
/ Constraint
15 Pounds
7 Pounds
10 Pounds
Total
$9.33
$16.43
$12
4. Which product offers the most profitable use of the plastic pellets?
“Golf Guard Product offers the most profitable use of the plastic pellets”
5. Which product has the largest contribution margin per unit?
Ski Guard product has the largest contribution margin per unit
= $140 per unit
Ski Guard
Golf Guard
Fishing Guard
Selling price per unit
$240
$370
$225
Variable cost per unit
$100
$255
$105
Contribution margin per unit
$140
$115
$120
/ Constraint7
7 Minutes
5 Minutes
7 Minutes
Total
$20
$23
$17.14
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.