What is the Impact of Discontinuing a Product Line and Maximizing Resource Utilization?
What is the total financial impact of discontinuing the bilge pump product line?
Total Financial Impact of Discontinuing a Product Line
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?
Contribution Margin per Minute of Constrained Resource
The contribution margin per minute of the constrained resource for each product can be calculated based on their processing time and contribution margin. 1. Ski Guard: Contribution margin per minute = ($130 - $70) / 9 minutes Contribution margin per minute = $60 / 9 minutes Contribution margin per minute = $6.67 2. Golf Guard: Contribution margin per minute = ($180 - $100) / 4 minutes Contribution margin per minute = $80 / 4 minutes Contribution margin per minute = $20 3. Fishing Guard: Contribution margin per minute = ($305 - $200) / 6 minutes Contribution margin per minute = $105 / 6 minutes Contribution margin per minute = $17.50 Therefore, Ski Guard earns $6.67, Golf Guard earns $20, and Fishing Guard earns $17.50 per minute of the constrained resource.Which product offers the most profitable use of the plastic injection molding machine?
Most Profitable Use of the Plastic Injection Molding Machine
Based on the calculation of contribution margin per minute of the constrained resource, Golf Guard offers the most profitable use of the plastic injection molding machine.If a severe shortage of plastic pellets makes it the new constraint, how much contribution margin per pound of the constrained resource is earned by each product?
Contribution Margin per Pound of Constrained Resource
When plastic pellets become the new constraint, the contribution margin per pound of the constrained resource for each product is: 1. Ski Guard: Contribution margin per pound = ($130 - $70) / 7 pounds Contribution margin per pound = $60 / 7 pounds Contribution margin per pound = $8.57 2. Golf Guard: Contribution margin per pound = ($180 - $100) / 16 pounds Contribution margin per pound = $80 / 16 pounds Contribution margin per pound = $5 3. Fishing Guard: Contribution margin per pound = ($305 - $200) / 9 pounds Contribution margin per pound = $105 / 9 pounds Contribution margin per pound = $11.67 Therefore, Ski Guard earns $8.57, Golf Guard earns $5, and Fishing Guard earns $11.67 per pound of the constrained resource.Which product offers the most profitable use of the plastic pellets?
Most Profitable Use of Plastic Pellets
Considering the contribution margin per pound of the constrained resource (plastic pellets), Ski Guard offers the most profitable use of the plastic pellets.Which product has the largest contribution margin per unit?