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 13 Golf Pishing Guard Guard $ 380 $ 225 170 6 minutes 4 minutes 13 pounds 6 pounds minutes 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 bel 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.) Sk Guard per minute Golf Guard per minute Contribution margin per minute of the constrained resource Fishing Guard per minute Required

Answer 1

Solution 1. Computation of Contribution per minute (Assuming time is constrained) Particulars Ski Guard Golf Guard Fishing Guard Selling Price per unit $ 300.00 $ 380.00 $ 225.00 Less: Variable Cost per unit $ 160.00 $ 170.00 $ 75.00 Contribution per unit (A) $ 140.00 $ 210.00 $ 150.00 Time per unit (minutes) (B) 7 6 4. Contribution per minute (A/B) $ 20.00 $ 35.00 $ 37.50 Computation of Contribution per minute (Assuming Plastic pelletes are Solution 3. constrained) Particulars Ski Guard Golf Guard Fishing Guard Selling Price per unit $ 300.00 $ 380.00 $ 225.00 Less: Variable Cost per unit $ 160.00 $ 170.00 $ 75.00 Contribution per unit (A) $ 140.00 $ 210.00 $ 150.00 Pounds of Plastic pellets per unit (B) 136 Contribution per pound (A/B) $ 12.73 $ 16.15 $ 25.00 11

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