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			$370			$205
Variable cost per unit		$130			$130			$145
Plastic injection molding machine processing time required to produce one unit		4 minutes			6 minutes			9 minutes
Pounds of plastic pellets per unit		9 pounds			16 pounds			7 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? (Round your answers to 2 decimal places.) Ski Guard Golf Guard Fishing Guard Selling price per unit Variable cost per unit Contribution margin per unit Plastic injection molding machine processing time required to produce one unit __ minutes __ minutes __ minutes Contribution margin per unit of the constrained resource __ per minute __ per minute __ per minute

1b.

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

	Golf Guard
	Fishing Guard
	Ski Guard

1c.

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

	Golf Guard
	Fishing Guard
	Ski 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? (Round your answers to 2 decimal places.)

Ski Guard Golf Guard Fishing Guard

Selling price per unit

Variable cost per unit

Contribution margin per unit

Plastic injection molding machine processing

time required to produce one unit __ pounds __ pounds __ pounds

Contribution margin per unit of the constrained resource __ per pound __ per pound __ per pound

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

Portsmouth Company makes upholstered furniture. Its only variable cost is direct materials. The demand for the company's products far exceeds its manufacturing capacity. The bottleneck (or constriant) in the production process is upholstery labor-hours. Information concerning three of Portsmouth's upholstered chairs appears below:

	Recliner	Sofa	Love Seat
Selling price per unit	$ 1,390	$ 1,800	$ 1,310
Variable cost per unit	$ 750	$ 1,300	$ 800
Upholstery labor-hours per unit	10 hours	10 hours	6 hours

Required:
1.	Portsmouth is considering paying its upholstery laborers additional compensation to work overtime. Assuming that this extra time would be used to produce sofas, up to how much of an overtime premium per hour should the company be willing to pay to keep the upholstery shop open after normal working hours?

Maximum amount payable per hour=

2.

A small nearby upholstering company has offered to upholster furniture for Portsmouth at a price of $45 per hour. The management of Portsmouth is confident that this upholstering companys work is high quality and their craftsmen can work as quickly as Portsmouths own craftsmen on the simpler upholstering jobs such as the Love Seat. Should management accept this offer?

	Yes
	No

Dorsey Company manufactures three products from a common input in a joint processing operation. Joint processing costs up to the split-off point total $96,000 per quarter. The company allocates these costs to the joint products on the basis of their relative sales value at the split-off point. Unit selling prices and total output at the split-off point are as follows:

Product	Selling Price			Quarterly Output
A	$	4	per pound		12,000	pounds
B	$	5	per pound		17,000	pounds
C	$	15	per gallon		4,000	gallons

Each product can be processed further after the split-off point. Additional processing requires no special facilities. The additional processing costs (per quarter) and unit selling prices after further processing are given below:

Product	Additional Processing Costs			Selling Price
A	$	45,000		$	6	per pound
B	$	40,000		$	9	per pound
C	$	12,250		$	19	per gallon

Required:
a.	Compute the incremental profit (loss) for each product.
	Product A Product B Product C Selling price after further processing Selling price at the split-off point Incremental revenue per pound or gallon 0 0 0 Total quarterly output in pounds or gallons Total incremental revenue 0 0 0 Total incremental processing costs Total incremental profit or loss $0 $0 $0

b.

Which product or products should be sold at the split-off point? (You may select more than one answer. Single click the box with a check mark for correct answers and double click to empty the box for the wrong answers.)

	Product A
	Product B
	Product C

c.

Which product or products should be processed further? (You may select more than one answer. Single click the box with a check mark for correct answers and double click to empty the box for the wrong answers.)

	Product A
	Product B
	Product C