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 | $ | 250 | $ | 370 | $ | 235 | ||||||

Variable cost per unit | $ | 170 | $ | 285 | $ | 145 | ||||||

Plastic injection molding
machine processing time required to produce one unit |
10 minutes | 11 minutes | 15 minutes | |||||||||

Pounds of plastic pellets per unit | 11 pounds | 6 pounds | 13 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?

Answer #1

1.

Ski Guard | Golf Guard | Fishing Guard | |

Selling price per unit $ | 250 | 370 | 235 |

Less: Variable cost per unit | 170 | 285 | 145 |

Contribution margin per unit $ | 80 | 85 | 90 |

Processing time per unit (minutes) | 10 | 11 | 15 |

Contribution margin per minute $ | 8.00 | 7.73 | 6.00 |

2. Ski Guard offers the most profitable use of the plastic injection molding machine.

3.

Ski Guard | Golf Guard | Fishing Guard | |

Contribution margin per unit $ | 80 | 85 | 90 |

Pounds of plastic pellets per unit | 11 | 6 | 13 |

Contribution margin per pound $ | 7.27 | 14.17 | 6.92 |

4. Golf Guard offers the most profitable use of the plastic pellets.

5. Fishing Guard has the largest contribution margin per unit.

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 $ 230 $ 310 $ 245 Variable cost per unit $
160 $ 190 $ 115 Plastic injection molding machine processing time
required to produce one unit 11 minutes 9 minutes 10 minutes Pounds
of plastic pellets per unit 7 pounds 13 pounds 14 pounds Required:
1. If we...

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
$
230
$
330
$
265
Variable cost per unit
$
90
$
150
$
105
Plastic injection molding
machine processing
time required to produce one unit
4 minutes
10 minutes
5 minutes
Pounds of plastic pellets per
unit
5 pounds
11 pounds
12 pounds
Required:
1. If we...

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
$
230
$
310
$
245
Variable cost per unit
$
160
$
190
$
115
Plastic injection molding
machine processing
time required to produce one unit
11 minutes
9 minutes
10 minutes
Pounds of plastic pellets per
unit
7 pounds
13 pounds
14 pounds
Required:
1. If we...

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
$
230
$
320
$
275
Variable cost per unit
$
80
$
160
$
140
Plastic injection molding
machine processing
time required to produce one unit
12 minutes
8 minutes
5 minutes
Pounds of plastic pellets per
unit
14 pounds
15 pounds
13 pounds
Required:
1. If we...

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
$
250
$
185
Variable cost per unit
$
160
$
170
$
85
Plastic injection molding machine processing
time required to produce one unit
5 minutes
6 minutes
2 minutes
Pounds of plastic pellets per unit
9 pounds
9 pounds
7 pounds
Required:
1. If we...

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 $ 230 $ 330 $ 265 Variable cost per unit $
90 $ 150 $ 105 Plastic injection molding machine processing time
required to produce one unit 4 minutes 10 minutes 5 minutes Pounds
of plastic pellets per unit 5 pounds 11 pounds 12 pounds Required:
1. If we...

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
$
280
$
200
$
245
Variable cost per unit
$
90
$
160
$
115
Plastic injection molding machine processing
time required to produce one unit
6 minutes
14 minutes
2 minutes
Pounds of plastic pellets per unit
12 pounds
10 pounds
8 pounds
Required:
1. If we...

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
$
210
$
310
$
265
Variable cost
per unit
$
70
$
150
$
130
Plastic
injection molding machine processing
time required to produce one unit
8 minutes
10 minutes
10 minutes
Pounds of
plastic pellets per unit
7 pounds
16 pounds
6 pounds
Required:
1. If we...

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
$
350
$
245
Variable cost per unit
$
100
$
150
$
105
Plastic injection molding machine processing
time required to produce one unit
6 minutes
12 minutes
11 minutes
Pounds of plastic pellets per unit
15 pounds
20 pounds
12 pounds
Required:
1. If we...

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...

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