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 250 $ 160 $ Golf Guard 250 $ 140 $ Fishing Guard 255 155 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 13 minutes 7 pounds 6 minutes 10 pounds 5 minutes 6 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?

Answer 1

1) Contribution margin per minute

	Ski guard	Golf guard	Fishing guard
Selling price	250	250	255
variable cost	160	140	155
Contribution margin	90	110	100
Minute per unit	13	6	5
Contribution margin per minute	6.92	18.33	20

2) Fishing guard

3) Contribution margin per pound

	Ski guard	Golf guard	Fishing guard
Selling price	250	250	255
variable cost	160	140	155
Contribution margin	90	110	100
Pound per unit	7	10	6
Contribution margin per pound	12.86	11	16.67

4) Fishing guard

5) Golf guard