Exercise 12-5 Utilizing a Constrained Resource [LO12-5]

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		$260			$330			$205
Variable cost per unit		$120			$180			$135
Plastic injection molding machine processing time required to produce one unit		9 minutes			12 minutes			11 minutes
Pounds of plastic pellets per unit		12 pounds			7 pounds			11 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 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?

	Golf Guard
	Fishing Guard
	Ski Guard

2c.

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

	Golf Guard
	Fishing Guard
	Ski Guard

3.

Which product has the largest unit contribution margin?

	Golf Guard
	Fishing Guard
	Ski Guard