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		$270			$350			$185
Variable cost per unit		$120			$210			$65
Plastic injection molding machine processing    time required to produce one unit		7 minutes			9 minutes			12 minutes
Pounds of plastic pellets per unit		11 pounds			15 pounds			13 pounds

Required:
1a.	The total time available on the plastic injection molding 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 molding machine is no longer the bottleneck. Instead, the constraint is the total available pounds of plastic pellets. What is contribution margin per unit of the constrained resources for Ski Guard, Golf Guard and Fishing Guard?

       

Answer 1

1)				ski	Golf	fishing
a)				Guard	Gurard	Guard
	Selling price per unit			270	350	185
	Variable cost per unit			120	210	65
	contribution margin			150	140	120
	machine processing min			7	9	12
	Contribution margin per min			21.43	15.56	10.00
1-b)	Ski guard
1-c)	Fishing Guard
2-a)				ski	Golf	fishing
				Guard	Gurard	Guard
	Selling price per unit			270	350	185
	Variable cost per unit			120	210	65
	contribution margin			150	140	120
	pounds per unit			11	15	13
	Contribution margin per pound			13.64	9.33	9.23