Utilizing a Constrained Resource [LO5]

Sport Luggage Inc. makes high-end hard-sided luggage for sports equipment. Data concerning three of the company’s most popular models appear below.

Ski Golf Fishing Vault Caddy Quiver Selling price per unit . . . . . . . . . . . . . . . . . . . . . . . $220 $300 $175 Variable cost per unit . . . . . . . . . . . . . . . . . . . . . . $60 $120 $55 Plastic injection molding machine processing time required to produce one unit . . . . . . . . . . . 4 minutes 5 minutes 2 minutes Pounds of plastic pellets per unit . . . . . . . . . . . . . 5 pounds 6 pounds 5 pounds Required:

1. The total time available on the plastic injection molding machine is the constraint in the production process. Which product would be the most profitable use of this constraint? Which product would be the least profitable use of this constraint?

2. 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. Which product would be the most profitable use of this constraint? Which product would be the least profitable use of this constraint?
3. Which product has the largest unit contribution margin? Why wouldn’t this product be the most profitable use of the constrained resource in either case?