Question

Exercise 12-5 Volume Trade-Off Decisions [LO12-5] Outdoor Luggage, Inc., makes high-end hard-sided luggage for sports equipment....

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 $ 260 $ 270 $ 305
Variable cost per unit $ 130 $ 130 $ 180
Plastic injection molding machine processing
time required to produce one unit
4 minutes 6 minutes 9 minutes
Pounds of plastic pellets per unit 9 pounds 16 pounds 7 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?

f 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.)

Ski Guard Golf Guard Fishing Guard
Contribution margin per minute of the constrained resource per minute per minute per minute

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? (Round your final answers to 2 decimal places.)

Ski Guard Golf Guard Fishing Guard
Contribution margin per pound of the constrained resource per pound per pound per pound

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