The Old Beach is a small restaurant. Susan Pratt, owner of the restaurant, is deciding how much refrigerator space to devote to four different drinks. Pertinent data on these four drinks are as follows:

Coca-Cola

Sprite-Lemon

Flavoured

milk

Orange juice

Selling price per case

$20.00

$22.00

$25.00

$39.20

Variable cost per case

$14.20

$16.5

$20.70

$30.20

Cases sold per meter of shelf space per day

25

24

4

5

Susan has a maximum front-shelf space of 14 meters to devote to the four drinks. She wants a minimum of 1 meter and a maximum of 6 meters of front-shelf space for each drink.

Required

a.Calculate the contribution margin per case of each type of drink.

[2 marks]

b.A co-worker of Susan's recommends that she maximise the shelf space devoted to those drinks with the highest contribution margin per case. Evaluate this recommendation.

[3 marks]

c.What shelf-space allocation for the four drinks would you recommend for the Old Beach restaurant? Show your calculations.

[3 marks]