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 270 $ 160 $ Golf Guard 250 $ 170 $ Fishing Guard 185 85 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 5 minutes 9 pounds 6 minutes 9 pounds 2 minutes 7 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

Part-1 Fishing Ski Guard Golf Guard Guard Selling Price Per Unit $270.00 $250.00 $185.00 Variable Cost Per Unit $160.00 $170.00 $85.00 Contribution Margin Per Unit(a) $110.00 $80.00 $100.00 Plastic Injection Molding Machine Processing Time Required To Produce One Unit (In Min ) (b) Contribution Margin Per Unit Of The $22.00 $13.33 $50.00 Constraint Resource (a/b) 2. The Most Profitable Product With The Use Of This Constraint Will Be Fishing Guard With The Maximum Contribution Margin. Part-3 Ski Guard Fishing Golf Guard Guard Selling Price Per Unit $270.00 $250.00 $185.00 Variable Cost Per Unit $160.00 $170.00 $85.00 Contribution Margin Per Unit (A) $110.000 $80.00 $100.00 Pound Of Plastic Pellet Require (B) Contribution Margin Per Unit Of The Constrain $12.22 $8.89 $14.29 4. The most profitable product with the use of this constraint will be Fishing guard with the maximum contribution margin. 5. Ski Guard is having largest contribution margin per Unit