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

The total financial impact of discontinuing the bilge pump product line can be calculated by comparing the contribution margin of the product line with the fixed expenses associated with it. The contribution margin of the bilge pump product line is calculated as follows: Contribution Margin = Sales - Variable Expenses Contribution Margin = $450,000 - $196,000 Contribution Margin = $254,000 The fixed expenses associated with the bilge pump product line are $345,000. To determine the total financial impact of discontinuing the bilge pump product line, we need to subtract the fixed expenses from the contribution margin: Total Impact = Contribution Margin - Fixed Expenses Total Impact = $254,000 - $345,000 Total Impact = -$91,000 Therefore, the total financial impact of discontinuing the bilge pump product line is a net operating loss of $91,000. This indicates that discontinuing the product line would result in a negative impact on the company's financial performance.

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?

Largest Contribution Margin per Unit

Among the three products, Fishing Guard has the largest contribution margin per unit at $105.
← Understanding cash flow activities and total net cashflow Calculate rewards program incentives simple interest vs percentage →

More Posts: