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. Ski Guard 300 138 Golf Guard 3e $ 150 $ Fishing Guard 255 $ $ 75 Selling price per unit Variable cost per unit Plastic injection molding machine processing time required to produce one unit Pounds of plastic pellets per unit 7 minutes 5 pounds 8 minutes 6 pounds 15 minutes 15 pounds 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? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 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? (Round your final answers to 2 decimal places.) Ski Guard Golf Guard Fishing Guard Contribution margin per minute of the constrained resource minute minute per minute < Required Required 2 >

Answer 1

1) Contribution margin per minute

	Ski guard	Golf guard	Fishing guard
Selling price	300	300	255
Variable cost	130	150	75
Contribution margin	170	150	180
Minute per unit	7	8	15
Contribution margin per minute	24.29	18.75	12

2) Ski guard

3) Contribution margin per minute

	Ski guard	Golf guard	Fishing guard
Selling price	300	300	255
Variable cost	130	150	75
Contribution margin	170	150	180
Pound per unit	5	6	15
Contribution margin per pound	34	25	12

4) Ski guard

5) Fishing guard