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?

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 $ 230 $ 330 $ 265 Variable cost per unit $ 90 $ 150 $ 105 Plastic injection molding machine processing
time required to produce one unit 4 minutes 10 minutes 5 minutes Pounds of plastic pellets per unit 5 pounds 11 pounds 12 pounds

Explanation / Answer

1 Ski Guard Golf Guard Fishing Guard Selling price per unit 230 330 265 Variable cost per unit 90 150 105 Contribution margin per unit 140 180 160 Plastic injection molding machine processing time required to produce one unit 4 10 5 Contribution margin per unit of the constrained resource 35 18 32 2 Ski Guard offers the most profitable use of the plastic injection molding machine 3 Ski Guard Golf Guard Fishing Guard Selling price per unit 230 330 265 Variable cost per unit 90 150 105 Contribution margin per unit 140 180 160 Pounds of plastic pellets per unit 5 11 12 Contribution margin per unit of the constrained resource 28 16.36 13.33 (Rounded off) 4 Ski Guard offers the most profitable use of the plastic pellets 5 Golf Guard has the largest contribution margin per unit

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