Question

Exercise 10-5 Utilizing a Constrained Resource [LO10-5]

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			$320			$215
Variable cost per unit		$110			$210			$155
Plastic injection molding machine processing    time required to produce one unit		14 minutes			13 minutes			11 minutes
Pounds of plastic pellets per unit		9 pounds			10 pounds			14 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? (Round your answers to 2 decimal places.) HOME ACCESSIBILITY PREVIEW Ski Guard Golf Guard Fishing Guard Selling price per unit Variable cost per unit Contribution margin per unit Plastic injection molding machine processing time required to produce one unit minutes minutes minutes Contribution margin per unit of the constrained resource per minute per minute per minute + 1b. Which product would be the most profitable use of this constraint? a. ski guard b. fishing guard c. golf guard 1c. Which product would be the least profitable use of this constraint? a. ski guard b. fishing guard c. 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 contribution margin per unit of the constrained resources for Ski Guard, Golf Guard and Fishing Guard? (Round your answers to 2 decimal places.) HOME ACCESSIBILITY PREVIEW Ski Guard Golf Guard Fishing Guard Selling price per unit Variable cost per unit Contribution margin per unit Pounds of plastic pellets required to produce one unit pounds pounds pounds Contribution margin per unit of the constrained resource per pound per pound per pound + 2b. Which product would be the most profitable use of this constraint? A. Ski guard B. fishing guard C. 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

Answer 1

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? (Round your answers to 2 decimal places.)

HOME

ACCESSIBILITY

PREVIEW

Ski Guard

Golf Guard

Fishing Guard

Selling price per unit

250

320

215

Variable cost per unit

110

210

155

Contribution margin per unit

140

110

60

Plastic injection molding machine processing time required to produce one unit

14

minutes

13

minutes

11

minutes

Contribution margin per unit of the constrained resource

10

per minute

8.46153846

per minute

5.4545455

per minute

+

1b.

Which product would be the most profitable use of this constraint?

a. ski guard

1c.

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

Fishing 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 contribution margin per unit of the constrained resources for Ski Guard, Golf Guard and Fishing Guard? (Round your answers to 2 decimal places.)

Ski Guard

Golf Guard

Fishing Guard

Selling price per unit

250

320

215

Variable cost per unit

110

210

155

Contribution margin per unit

140

110

60

Pounds of plastic pellets required to produce one unit

9

Pounds

10

Pounds

14

Pounds

Contribution margin per unit of the constrained resource

15.5555556

Per Pound

11

Per Pound

4.2857143

Per Pound

+

2b.

Which product would be the most profitable use of this constraint?

A. Ski guard

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

C. Fishing Gaurds

Requirement 3

Sky Guard Largest Unit contribution margin