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. 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? Why wouldn’t this product be the
most profitable use of the constrained resource in either case?