Question

Outdoor Luggage, Inc., makes high-end hard-sided luggage for sports equipment. Data concerning three of the company’s...

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 $ 290 $ 190 $ 215
Variable cost per unit $ 185 $ 90 $ 90
Plastic injection molding machine processing
time required to produce one unit
12 minutes 6 minutes 8 minutes
Pounds of plastic pellets per unit 10 pounds 13 pounds 9 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?

Homework Answers

Answer #1
1) ski Golf fishing
Guard Gurard Guard
Selling price per unit 290 190 215
Variable cost per unit 185 90 90
contribution margin 105 100 125
machine processing min 12 6 8
Contribution margin per min 8.75 16.67 15.63
2) Golf Guard
3) ski Golf fishing
Guard Gurard Guard
Selling price per unit 290 190 215
Variable cost per unit 185 90 90
contribution margin 105 100 125
pounds per unit 10 13 9
Contribution margin per pound 10.50 7.69 13.89
4) Fishing Guard
5) Fishing gurard
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