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Each morning, Mark Smith stocks the drink case at Mark's Beach Hut in Grand Isle, Louisiana. Mark's Beach Hut has 115 linear feet of
Each morning, Mark Smith stocks the drink case at Mark's Beach Hut in Grand Isle, Louisiana. Mark's Beach Hut has 115 linear feet of refrigerated display space for cold drinks. Each linear foot can hold either six 12-ounce cans or four 20-ounce plastic or glass bottles. (Click the icon to view the information on the cold drinks.) The beverage stand can sell all drinks stocked in the display case each morning. Read the requirements. Requirement 1. What is the constraining factor at Mark's Beach Hut? What should Mark stock to maximize profits? What is the maximum contribution margin he could generate from refrigerated drinks each day? The constraining factor is linear feet of shelf space . Mark's should stock the drink with the highest contribution margin. Complete the product mix analysis to determine which product would maximize Mark's profits. Mark's Beach Hut Product Mix Analysis Data table grand-cola boost-soda 12 oz. Cans 20 oz. Bottles right-cola 20 oz. Bottles X The beverage stand sells three types of cold drinks: 1. Grand-Cola in 12-oz. cans for $1.50 per can 2. Boost - Soda in 20-oz. plastic bottles for $1.80 per bottle 3. Right-Cola in 20-oz. glass bottles for $2.25 per bottle Mark's Beach Hut pays its suppliers the following: 1. $0.15 per 12-oz. can of grand-cola 2. $0.40 per 20-oz. bottle of boost - soda 3. $0.65 per 20-oz. bottle of right-cola Mark's Beach Hut's monthly fixed expenses include the following: Hut rental.... Refrigerator rental Mark's salary...... $ 375 75 1,800 $ 2,250 Total fixed expenses Requirements 1. What is the constraining factor at Mark's Beach Hut? What should Mark 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 Mark refuses to devote more than 60 linear feet and no less than 10 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?
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