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 Golf Fishing Guard Guard Guard 259 $ 378 $ 235 170 $ 285 $ 10 minutes 11 minutes 15 minutes 11 pounds 6 pounds 13 pounds 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 145 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 per minute Contribution margin per minute of the constrained resource minute miny Required 1 Required 2 >

Answer 1

	Ski guard	Gofl guard	Fishing guard
Selling price per unit	250	370	235
(-) Variable cost per unit	170	285	145
Contribution margin per unit	80	85	90

Required 1 :
Here, Total time available on plastic injection molding is the constraint :
	Ski guard		Golf guard		Fishing guard
Contribution margin per unit	80		85		90
(/) Plastic injection molding machine processing time required to produce one unit ( Minutes )	10		11		15
Contribution margin per minute of the contrained resource	8.00	per minute	7.73	per minute	6.00	per minute

Required 2 :

Answer = Ski guard

As the Contribution margin per minute of the constrained resource for Ski guard is greater than that of the other products, it offers the most profitable use of the plastic injection molding machine

Required 3 :
Here, pounds of plastic pellets is the constraint :
	Ski guard		Golf guard		Fishing guard
Contribution margin per unit	80		85		90
(/) Pounds of plastic pellets per unit	11		6		13
Contribution margin per pound of the constrained resource	7.27	per pound	14.17	per pound	6.92	per pound

Required 4 :

Answer : Gold guard

As the Contribution margin per pound of the constrained resource for Golf guard is greater than that of the other products, it offers the most profitable use of the plastic pellets

Required 5 :

Answer : Fishing guard