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 240 $ 120 $ Golf Guard 330 $ 180 $ Pishing Guard 285 130 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 11 minutes 9 pounds 8 minutes 15 minutes 6 pounds 15 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? Complete this question by entering your answers in the tabs below.

Answer 1

Answer 1

	Ski Guard		Golf Guard		Fishing Guard
Contribution margin per minute of constrained resource	$ 10.91	per minute	$ 18.75	per minute	$ 31.00	per minute

Explanation

	Ski Guard	Golf Guard	Fishing Guard
Selling Price	$        240	$          330	$               285
Variable Cost	$        120	$          180	$               130
Contribution	$        120	$          150	$               155
Minutes for 1 unit	$          11	$               8	$                    5
Contribution margin per minute of constrained resource	$    10.91	$       18.75	$            31.00

Answer 2

Fishing Guard offers most profitable use.

Answer 3

	Ski Guard		Golf Guard		Fishing Guard
Contribution margin per pound of constrained resource	$ 13.33	per pound	$ 25.00	per pound	$ 10.33	per pound

Explanation

	Ski Guard	Golf Guard	Fishing Guard
Selling Price	$        240	$          330	$               285
Variable Cost	$        120	$          180	$               130
Contribution	$        120	$          150	$               155
Pallets per unit	$            9	$               6	$                 15
Contribution margin per pound of constrained resource	$    13.33	$       25.00	$            10.33

Answer 4

Golf Guard offers the most profitable use.

Answer 5

Fishing guard has maximum contribution per unit.

Explanation

	Ski Guard	Golf Guard	Fishing Guard
Selling Price	$        240	$          330	$               285
Variable Cost	$        120	$          180	$               130
Contribution	$        120	$          150	$               155

In case of any doubt, please comment.