Exercise 12-5 Volume Trade-Off Decisions [LO12-5] Outdoor Luggage, Inc., makes h

Question

Exercise 12-5 Volume Trade-Off Decisions [LO12-5]

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 $ 250 $ 250 $ 255 Variable cost per unit $ 160 $ 140 $ 155 Plastic injection molding machine processing
time required to produce one unit 13 minutes 6 minutes 5 minutes Pounds of plastic pellets per unit 7 pounds 10 pounds 6 pounds

Explanation / Answer

1 Ski guard Golf guard Fishing guard Selling price per unit 250 250 255 Variable cost per unit 160 140 155 Contribution margin per unit 90 110 100 Plastic injection molding machine processing time required to produce one unit 13 6 5 Contribution margin per unit of the constrained resource 6.92 18.33 20.00 2 Fishing guard 3 Ski guard Golf guard Fishing guard Selling price per unit 250 250 255 Variable cost per unit 160 140 155 Contribution margin per unit 90 110 100 Pounds of plastic pellets required to produce one unit 7 10 6 Contribution margin per unit of the constrained resource 12.86 11.00 16.67 4 Fishing guard 5 Golf guard

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.