Each morning, Larry Ivery stocks the drink case at Larry's Beach Hut in Galveston, Texas. Larry's Beach Hut has 125 linear feet of refrigerated display space for cold drinks. Each linear foot can hold either five 12-ounce cans or three 20-ounce plastic or glass bottles.

1.	What is the constraining factor at Larry's Beach Hut? What should Larry stock to maximize profits? What is the maximum contribution margin he could generate from refrigerated drinks each day?
2.	To provide variety to customers, suppose Larry refuses to devote more than 70 linear feet and no less than 15 linear feet to any individual product. Under this condition, how many linear feet of each drink should be stocked? How many units of each product will be available for sale each day?
3.	Assuming the product mix calculated in Requirement 2, what contribution margin will be generated from refrigerated drinks each day?

The beverage stand sells three types of cold drinks:

1.To BeCola in 12-oz. cans for $1.45 per can

2.Fizzle Pop in 20-oz. plastic bottles for $1.70 per bottle

3.ValueSodain 20-oz. glass bottles for $2.15 per bottle Larry's

Beach Hut pays its suppliers the following:

1.) $0.20 per 12-oz. can of tobecola

2.) $0.40 per 20-oz. bottle of fizzle pop

3.) $0.75 per 20-oz. bottle of valuesoda Larry's

Beach Hut's monthly fixed expenses include the following:

Hut rental. . . . . . . . . . . . . .	$365
Refrigerator rental. . . . .	80
Larry's salary. . . . . . . . . .	1,500
Total fixed expenses. . . .	$1,945

Requirement 1. What is the constraining factor at

Larry's Beach Hut? What should Larry stock to maximize profits? What is the maximum contribution margin he could generate from refrigerated drinks each day? The constraining factor [linear sheet of shelf space, number of customer, number of toba cola cans, number of fizzle bottles, value soda ]is Larry's should stock the drink with the [highest, lowest] contribution margin. Complete the product mix analysis to determine which product would maximize Larry's profits.

Larry's Beach Hut
Product Mix Analysis
	tobe-cola		fizzle pop		value-soda
	12 oz. Cans		20 oz. Bottles		20 oz. Bottles

(For the first column)

Contribution for direct hours

Contribution per linear of shelf space

Fixed cost

sales price

Unit per linear

Variable cost

[ tobe cola 12oz, fizzle pop 20oz, value soda20z] has the highest contribution margin per linear foot of shelf space. To maximize profits, Larry's should devote all its shelf space to [ tobe cola 12oz, fizzle pop 20oz, value soda20z]

(Round to the nearest whole number)

The maximum contribution margin that Larry could generate each day from refrigerated drinks is

.

Requirement 2. To provide variety to customers, suppose Larry refuses to devote more than 70 linear feet and no less than

15 linear feet to any individual product. Under this condition, how many linear feet of each drink should be stocked? How many units of each product will be available for sale each day?

Show how

Larry

should stock his shelves, based on each product's contribution margin (CM):

1st stock maximum contraint of	(0,15,40,70,125)	linear ft. with product having the	(High, Med, Low)	CM:	(120z, Tobe cola, 20oz Fizzle pop, 20oz value soda)
Next minimum constraint of	(0,15,40,70,125)	linear ft. with product having the	(High, Med, Low)	CM:	(120z, Tobe cola, 20oz Fizzle pop, 20oz value soda)
Stock the remaining	(0,15,40,70,125)	linear ft. with product having the	(High, Med, Low)	CM:	(120z, Tobe cola, 20oz Fizzle pop, 20oz value soda)

Now calculate the units available for sale based on the product mix determined above.

	Units for sale
tobe-cola in 12 oz. cans:		cans
fizzle pop in 20 oz. bottles:		bottles
value-soda in 20 oz. bottles:		bottles

Requirement 3. Assuming the product mix calculated in Requirement 2, what contribution margin will be generated from refrigerated drinks each day? (Round your answers to the nearest whole dollar.)

	Contribution Margin
tobe-cola in 12 oz. cans:
fizzle pop in 20 oz. bottles:
value-soda in 20 oz. bottles:
Total