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The is a take - out food store at a popular beach resort. , owner of the , is deciding how much refrigerator space to
The is a takeout food store at a popular beach resort. owner of the is deciding how much refrigerator space to devote to four different drinks. Pertinent data on these four drinks are as follows:
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has a maximum front shelf space of feet to devote to the four drinks. She wants a minimum of foot and a maximum of feet of front shelf space for each drink.
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Part
Requirement Calculate the contribution margin per case of each type of drink.
Natural
Cola
Lemonade
Punch
Orange Juice
Selling price per case
$
$
$
$
Variable cost per case
Contribution margin per case
$
$
$
$
Part
Requirement A coworker of 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.
A
This recommendation does not make sense. The company should allocate equal shelf space to each product so the customer has plenty of options.
B
This recommendation makes sense. It will allow the company to maximize their contribution margin.
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.
Your answer is correct.
Part
Requirement What shelfspace allocation for the four drinks would you recommend for the 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
Contribution margin per case
$
$
$
$
x Cases sold per foot of shelf space per day
Daily contribution margin per ft of shelf space
$
$
$
$
Part
Allocate the shelf space to each product and show the effect it will have on the 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
Lemonade
Punch
Natural Orange Juice
Total
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