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			Golf Guard			Fishing Guard
Selling price per unit	$	250		$	340		$	265
Variable cost per unit	$	80		$	140		$	115
Plastic injection molding machine processing time required to produce one unit	5 minutes			6 minutes			3 minutes
Pounds of plastic pellets per unit	6 pounds			15 pounds			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?

	Ski Guard Golf Guard Fishing Guard Contribution margin per minute of the constrained resource per minute    per minute    per minute

2. Which product offers the most profitable use of the plastic injection molding machine?

	Fishing Guard or Ski Guard or Golf Guard

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 Contribution margin per pound of the constrained resource    per pound    per pound    per pound

4. Which product offers the most profitable use of the plastic pellets?

	Golf Guard or Ski Guard or Fishing Guard

5. Which product has the largest contribution margin per unit?

- Ski Guard or
- Fishing Guard or
-Ski Guard

Answer 1

1) Contribution margin per minute

	Ski guard	Golf guard	Fishing guard
Selling price	250	340	265
Variable cost	80	140	115
Contribution margin	170	200	150
Minute per unit	5	6	3
Contribution margin per minute of the constrained resource	34	33.33	50

2) Fishing guard

3) Contribution margin per pound

	Ski guard	Golf guard	Fishing guard
Selling price	250	340	265
Variable cost	80	140	115
Contribution margin	170	200	150
Pound per unit	6	15	6
Contribution margin per pound of the constrained resource	28.33	13.33	25

4) Ski guard

5) Golf guard