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 Fishing Guard 320 $ Guard Selling price per unit Variable cost per unit Plastic injection molding machine processing tine required to produce one unit Pounds of plastic pellets per unit 25e 235 110 200 135 13 minutes 5 minutes 11 minutes 14 pounds 7 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? 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
	Ski Guard	Golf Guard	Fishing Guard
Selling price per unit	250	320	235
Less: Variable cost per unit	110	200	135
Contribution margin per unit	140	120	100
Plastic injection molding machine processing time per unit	13	11	5
Contribution margin per minute of the constrained resource	10.77	10.91	20.00
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	250	320	235
Less: Variable cost per unit	110	200	135
Contribution margin per unit	140	120	100
Pounds of plastic pellets per unit	14	7	6
Contribution margin per pound of the constrained resource	10.00	17.14	16.67
4
Golf Guard offers the most profitable use of the plastic pellets
5
Ski Guard has the largest contribution margin per unit