12-12 How will relating product contribution margins to the amount of the constrained resource they consume help a company maximize its profits?
Related questions
Outdoor Luggage, Inc., makes high-end hard-sided luggage for sports equipment. Data concerning three of the companyâs most popular models appear below.
| Ski Guard | Golf Guard | Fishing Guard | ||||||||||
| Selling price per unit | $ | 300 | $ | 380 | $ | 225 | ||||||
| Variable cost per unit | $ | 160 | $ | 170 | $ | 75 | ||||||
| Plastic injection molding machine processing time required to produce one unit | 7 minutes | 6 minutes | 4 minutes | |||||||||
| Pounds of plastic pellets per unit | 11 pounds | 13 pounds | 6 pounds | |||||||||
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? (Round your final answers to 2 decimal places.)
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2. 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? (Round your final answers to 2 decimal places.)
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