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 $ 310 $ 330 $ 275 Variable cost per unit $ 150 $ 130 $ 85 Plastic injection molding machine processing time required to produce one unit 8 minutes 15 minutes 5 minutes Pounds of plastic pellets per unit 7 pounds 9 pounds 10 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

1a
	Ski Guard	Golf Guard	Fishing Guard
Selling price per unit	310	330	275
Variable cost per unit	150	130	85
Contribution margin per unit	160	200	190
Plastic injection molding machine processing time required to produce one unit ( in Min )	8	15	5
Contribution margin per unit of the constraint resource	20.00	13.33	38.00

2. The most profitable product with the use of this constraint will be Ski Guard with the maximum contribution margin.

3
	Ski Guard	Golf Guard	Fishing Guard
Selling price per unit	310	330	275
Variable cost per unit	150	130	85
Contribution margin per unit	160	200	190
Pound of Plastic pellet require	7	9	10
Contribution margin per unit of the constraint resource	22.86	22.22	19.00

4. The most profitable product with the use of this constraint will be SKI guard with the maximum contribution margin.

5. Golf Guard is having largest contribution margin per Unit