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 Golf Guard Fishing Guard Selling price per unit Variable cost per unit Plastic injection molding machine processing 230 80 $ 320 $ 160 $ 275 140 12 minutes 8 minutes 5 minutes 14 pounds 15 pounds 13 pounds t ime required to produce one unit Pounds of plastic pellets per unit Required 1. If we assume that the total time avallable 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

1.

2.

Fishing Guard (as contribution margin per minute is higher)

3.

4.

Ski Guard (as contribution margin per minute is higher)

5.

Golf Guard has the highest contribution margin per unit

Ski Guard Golf Guard Fishing Guard Selling price per unit 230 320 275 Variable cost per unit 80 160 140 Contribution margin per unit 150 160 135 Processing time required per unit 12 minutes 8 minutes 5 minutes Contribution margin per minute 12.5 20 27

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