Exercise 10-5 Utilizing a Constrained Resource [LO5]

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

	Ski Vault			Golf Caddy			Fishing Quiver
Selling price per unit	$	230		$	330		$	175
Variable cost per unit	$	110		$	160		$	75
Plastic injection molding machine processing time required to produce one unit	12 minutes			8 minutes			5 minutes
Pounds of plastic pellets per unit	14 pounds			15 pounds			13 pounds

Required:
1a.	The total time available on the plastic injection molding machine is the constraint in the production process. What is contribution margin per unit of the constrained resources for Ski Vault, Golf Caddy and Fishing Quiver? (Round your answers to 2 decimal places.)

	Ski Vault		Golf Caddy		Fishing Quiver
Contribution margin	$	per minute	$	per minute	$	per minute

1b.

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

	Golf Caddy
	Ski Vault
	Fishing Quiver

1c.

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

	Golf Caddy
	Ski Vault
	Fishing Quiver

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 Vault, Golf Caddy and Fishing Quiver? (Round your answers to 2 decimal places.)

	Ski Vault		Golf Caddy		Fishing Quiver
Contribution margin	$	per pound	$	per pound	$	per pound

2b.

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

	Golf Caddy
	Fishing Quiver
	Ski Vault

2c.

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

	Golf Caddy
	Fishing Quiver
	Ski Vault

3.

Which product has the largest unit contribution margin?

	Golf Caddy
	Fishing Quiver
	Ski Vault