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?

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 $ 310 $ 330 $ 275 Variable cost per unit $ 150 $ 130 $ 85 Plastic injection molding machine processing
time required to produce one unit 8 minutes 15 minutes 5 minutes Pounds of plastic pellets per unit 7 pounds 9 pounds 10 pounds

Explanation / Answer

Particulars Calcuation Ski Golf Fishing Guard Guard Guard Selling price per unit A $ 310 $ 330 $ 275 Variable cost per unit B $ 150 $ 130 $ 85 Contribution Margin per unit A-B $ 160 $ 200 $ 190 1 Contribution margin per minute of the constrained resource Particulars Calcuation Ski Guard Golf Guard Fishing Guard Contribution Margin per unit A $ 160 $ 200 $ 190 Plastic injection molding machine processing time required to produce one unit B 8 Minutes 15 Minutes 5 Minutes Contribution margin per minute A/B $ 20 $ 13.33 $ 38 3 Contribution margin per pound of the constrained resource Particulars Calcuation Ski Guard Golf Guard Fishing Guard Contribution Margin per unit A $ 160 $ 200 $ 190 Pounds of plastic pellets per unit B 7 Pounds 9 Pounds 10 Pounds Contribution margin per pound A/B $ 22.86 $ 22.22 $ 19

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