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	$	200	$	300	$	255
Variable cost per unit	$	60	$	140	$	55
Plastic injection molding machine processing time required to produce one unit		2 minutes		5 minutes		4 minutes
Pounds of plastic pellets per unit		7 pounds		4 pounds		8 pounds

Required:

1-a. 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?

1-b. Which product would be the most profitable use of this constraint?

	Ski Guard
	Golf Guard
	Fishing Guard

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

	Ski Guard
	Golf Guard
	Fishing Guard

2-a. 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?

2-b. Which product would be the most profitable use of this constraint?

	Ski Guard
	Golf Guard
	Fishing Guard

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

	Ski Guard
	Golf Guard
	Fishing Guard

3. Which product has the largest unit contribution margin?

	Ski Guard
	Golf Guard
	Fishing Guard

Answer 1

1a
	Ski Guard	Golf Guard	Fishing Guard
Selling price per unit	200	300	255
Less: Variable cost per unit	60	140	55
Contribution margin per unit	140	160	200
Plastic injection molding machine processing time per unit	2	5	4
Contribution margin per minute of the constrained resource	70.00	32.00	50.00
1b
Ski Guard offers the most profitable use of the plastic injection molding machine
1c
Golf Guard offers the least profitable use of the plastic injection molding machine
2a
	Ski Guard	Golf Guard	Fishing Guard
Selling price per unit	200	300	255
Less: Variable cost per unit	60	140	55
Contribution margin per unit	140	160	200
Pounds of plastic pellets per unit	7	4	8
Contribution margin per pound of the constrained resource	20.00	40.00	25.00
2b
Golf Guard offers the most profitable use of the plastic pellets
2c
Ski Guard offers the least profitable use of the plastic pellets
3
Fishing Guard has the largest contribution margin per unit