Question
bargain bran is a large discount supermarket. Profits have declined, so the manager has collected data on revenues and costs for different food categories. The
bargain bran is a large discount supermarket. Profits have declined, so the manager has collected data on revenues and costs for different food categories. The following data pertain to some of the frozen foods that bargain bran sells. To facilitate comparisons, the manager has listed average price and cost information for each category in equivalent square-foot packages:
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| FROZEN | FROZEN |
| ICE CREAM | JUICES | DINNERS | VEGETABLES |
Selling price per unit | $12.30 | $12.40 | $24.00 | $9.40 |
(square-foot package) |
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Variable costs per unit | $8.00 | $9.50 | $20.20 | $7.10 |
(square-foot package) |
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Minimum square footage required | 21 | 21 | 21 | 21 |
Maximum square footage allowed | 150 | 150 | 150 | 150 |
The manager wants a maximum of 370 square feet devoted to the four categories in this table.
Requirements
(a) | Given the manager's constraints, and assuming that the store can sell whatever is displayed on the shelves, what shelf mix (i.e., what number of square feet for each category in the table) will maximize Bargain Barn's contribution margin from these four categories? |
(b) | What other factors might the manager consider in deciding on the amount of shelf space per category? |
Requirement (a) Given the manager's constraints, and assuming that the store can sell whatever is displayed on the shelves, what shelf mix (i.e., what number of square feet for each category in the table) will maximize
Bargain Barn's
contribution margin from these four categories?
Complete the following table to determine the shelf mix allocation in square footage that will maximize
Bargain Barn's
contribution margin from these four categories.
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| Frozen | Frozen | ||||
| Ice Cream | Juices | Dinners | Vegetables | ||||
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Contribution margin per unit |
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Allocation in square footage |
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