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 $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 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
Fishing Guard
Golf Guard

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

Ski Guard
Fishing Guard
Golf Guard

3. Which product has the largest unit contribution margin?

Ski Guard
Fishing Guard
Golf Guard

Homework Answers

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
2-b) Ski guard
2-c) Fishing gurard
3) Ski guard has largest contribution
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