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. 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 Ski Golf Fishing Guard Guard Guard 230 $ 320 $ 275 80 $ 160 $ 140 12 minutes 8 minutes 5 minutes 14 pounds 15 pounds 13 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 Which product has the largest contribution margin per unit?

Answer 1

1
	Ski Guard	Golf Guard	Fishing Guard
Selling price per unit	230	320	275
Less: Variable cost per unit	80	160	140
Contribution margin per unit	150	160	135
Plastic injection molding machine processing time per unit	12	8	5
Contribution margin per minute of the constrained resource	12.50	20.00	27.00
2
Fishing Guard offers the most profitable use of the plastic injection molding machine
3
	Ski Guard	Golf Guard	Fishing Guard
Selling price per unit	230	320	275
Less: Variable cost per unit	80	160	140
Contribution margin per unit	150	160	135
Pounds of plastic pellets per unit	14	15	13
Contribution margin per pound of the constrained resource	10.71	10.67	10.38
4
Ski Guard offers the most profitable use of the plastic pellets
5
Golf Guard has the largest contribution margin per unit