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

Guard Fishing

Guard

Selling price per unit $310 $320 $265

Variable cost per unit $110 $150 $145

Plastic injection moulding machine processing

time required per unit 8 min 10 min 10 min

Kgs of plastic pellets per unit 7 kg 16 kg 6 kg

Required:

1a. The total time available on the plastic injection moulding machine is the constraint in the production process. What is the contribution margin per unit of the constrained resources for Ski Guard, Golf Guard and Fishing Guard?

1b. Which product would be the most profitable use of this constraint?

Ski Guard

Fishing Guard

Golf Guard

1c. Which product would be the least profitable use of this constraint?

Ski Guard

Fishing Guard

Golf Guard

2a. A severe shortage of plastic pellets has required the company to cut back its production so much that the plastic injection moulding machine is no longer the bottleneck. Instead, the constraint is the total available kilograms of plastic pellets. What is the contribution margin per unit of the constrained resources for Ski Guard, Golf Guard and Fishing Guard?

2b. Which product would be the most profitable use of this constraint?

Ski Guard

Golf Guard

Fishing Guard

2c. Which product would be the least profitable use of this constraint?

Ski Guard

Golf Guard

Fishing Guard

3. Which product has the largest unit contribution margin?

Answer 1