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 companys most popular
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 companys 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? | ||||||
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| 1-c. | Which product would be the least profitable use of this constraint? | ||||||
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| 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 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? | ||||||
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| 2-c. | Which product would be the least profitable use of this constraint? | ||||||
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| 3. | Which product has the largest unit contribution margin? | ||||||
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