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		$250			$320			$235
Variable cost per unit		$110			$200			$135
Plastic injection molding machine processing time required to produce one unit		13 minutes			11 minutes			5 minutes
Pounds of plastic pellets per unit		14 pounds			7 pounds			6 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?
	Fishing Guard Ski Guard Golf Guard

1c.	Which product would be the least profitable use of this constraint?
	Fishing Guard Ski 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 Ski Guard Fishing Guard

2c.	Which product would be the least profitable use of this constraint?
	Golf Guard Ski Guard Fishing Guard

3.	Which product has the largest unit contribution margin?
	Ski Guard Fishing Guard Golf Guard