Question
The manager of a shop is deciding how much shelf space to devote to three different products. Sales and costs for the last month are
The manager of a shop is deciding how much shelf space to devote to three different products. Sales and costs for the last month are shown below:
Pencil case | Photo frame | Notebook | ||
Selling price per unit | 6.00 | 4.90 | 8.00 | |
Variable costs per unit | 2.40 | 3.34 | 5.20 | |
Average units sold per day | 25 | 20 | 15 | |
Average units sold per metre of shelf space per day | 6 | 10 | 9 | |
Number of days in month | 30 | |||
Total fixed costs | 1,000 |
From the next month, after a re-allocation of shelf space, the shop will have a maximum front shelf space of 10 metres available for the three products. The manager wants a minimum of one metre and a maximum of six metres shelf space for each product.
1. Show the contribution margin per unit for each product and the total revenue, total contribution and total profit for the last month.
2. It is assumed that all the unit sales and cost information above, and the mix of products and sales, will remain the same for the current month.
a- Based on the proportion of products sold, what is the average contribution per unit for all three products?
b- How many of each products needs to be sold in this month to reach break-even?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started