Please find requirement 3.
The Beach Umbrella is a take-out food store at a popular beach resort. Cindy Smith, owner of the Beach Umbrella, is deciding how much refrigerator space to devote to four different drinks. Pertinent data on these four drinks are as follows: (Click to view the data.) Smith has a maximum front shelf space of 12 feet to devote to the four drinks. She wants a minimum of 1 foot and a maximum of 6 feet front shelf space for each drink. Read the requirements Requirement 1. Calculate the contribution margin per case of each type drink Natural Cola Lemonade Punch Orange Juice 18.70 $ 19.50 $ 27.10 $ 39.50 14.40 16.70 20.70 29.90 $ Selling price per case Variable cost per case $ 4.30 $ 2.80 $ 8.40 S 9.60 Contribution margin per case Requirement 2. A coworker of Smith's recommends that she maximize the shelf space devoted to those drinks with the highest contribution margin per case. Do you agree with this recommendation? Explain briefly. CA This recommendation makes sense. It will allow the company to maximize their contribution margin. OB. This recommendation does not make sense. The company should allocate equal shelf space each product so the customer has plenty of options. c. This recommendation does not make sense. It fails to recognize that the company has limited shelf space and therefore wants to maximize the contribution margin per foot of shelf space. Requirement 3. What shelf-space allocation for the four drinks would you recommend for the Beach Umbrella? Show your calculations. Begin by calculating the amount that should be used to determine the allocation. (Round your answers to the nearest cent.) Natural Cola Lemonade Punch Orange Juice 4.30 $ 2.80 $ 6.40 $ 9.60 Contribution margin per case x Cases sold per foot of shelf space per day 15 12 25 22 $ 64.50 $ 33.60 $ 160.00 $ 211.20 Daily contribution margin per ft of shelf space Allocate the shelf space to each product and show the effect it will have on the Beach Umbrella's operations. (Round your answers to the nearest cent.) Daily Contribution Margin Total Feet of per Foot of Contribution Margin Shelf Space Shelf Space per Day Cola 64.5 Lemonade 33.6 Punch 160 Natural Orange Juice 211.2 Total Requirements 1. Calculate the contribution margin per case of each type of drink. 2. A coworker of Smith's recommends that she maximize the shelf space devoted to those drinks with the highest contribution margin per case. Do you agree with this recommendation? Explain briefly. 3. What shelf-space allocation for the four drinks would you recommend for the Beach Umbrella? Show your calculations
