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?

Ski
Guard Golf
Guard Fishing
Guard Selling price per unit $ 220 $ 330 $ 200 Variable cost per unit $ 140 $ 260 $ 115 Plastic injection molding machine processing
time required to produce one unit 4 minutes 12 minutes 9 minutes Pounds of plastic pellets per unit 12 pounds 15 pounds 13 pounds

Explanation / Answer

Answer:-1)-

Plastic injection molding machine processing time required to produce per unit

Contribution margin per minute of the constrained resource

2)- As per the above ranking product Ski Gaurd offers the the most profitable use of the plastic injection molding machine.

3)-

Explanation :- As per the both constrained resoures product Ski Guard is the most profitable product in both ranking.

Statement of Ranking Products Ski Gaurd Golf Gaurd Fishing Gaurd $ $ $ Selling Price per Unit 220 300 200 Less:- Variable Manufaturing cost per unit 140 260 115 Contribution per unit 80 40 85

Plastic injection molding machine processing time required to produce per unit

4 Minutes 12 Minutes 9 Minutes

Contribution margin per minute of the constrained resource

20 3.3 9.4 Ranking 1 3 2

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