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 Guard			Golf Guard			Fishing Guard
Selling price per unit	$	240		$	370		$	225
Variable cost per unit	$	100		$	255		$	105
Plastic injection molding machine processing time required to produce one unit	7 minutes			5 minutes			7 minutes
Pounds of plastic pellets per unit	15 pounds			7 pounds			10 pounds

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?

Answer 1

ski huard Golf guard Ans. 370 200 Finishing guard 225 (los) 120 (10o) (255) 115 luo Selling Price Variable cost Contribution per unit Plastic injection molding machine Processing time to produce one unit Contribution margin per unit of Constrained resource 7 min 5min 7mm 20/min 23 17.14 . most Low profitable Product = 4 11 & golf huard Fishing Guard

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