The Beach Cooler is a take-out food store at a popular beach resort. Susan Sexton, owner of the Beach Cooler, is deciding how much refrigerator space to devote to four different drinks. Pertinent data on these four drinks are as follows: Natural Cola Lemonade Punch Orange Juice Selling price per case $19.25 $20.75 $27.90 $39.50 Variable cost per case $14.40 $16.30 $21.70 $30.20 Cases sold per foot of shelf space per day 24 12 5 13 Sexton 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 of front shelf space for each drink. Requirements 1. Calculate the contribution margin per case of each type of drink. 2. A coworker of Sexton'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 Cooler? Show your calculations.
The Beach Cooler is a take-out food store at a popular beach resort. Susan Sexton, owner of the Beach Cooler, is deciding how much refrigerator space to devote to four different drinks. Pertinent data on these four drinks are as follows:
|
|
|
|
|
Natural |
|
|
Cola |
Lemonade |
Punch |
Orange Juice |
|
Selling price per case |
$19.25 |
$20.75 |
$27.90 |
$39.50 |
|
Variable cost per case |
$14.40 |
$16.30 |
$21.70 |
$30.20 |
|
Cases sold per foot of shelf space per day |
24 |
12 |
5 |
13 |
Sexton 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 of front shelf space for each drink.
Requirements
|
1. |
Calculate the contribution margin per case of each type of drink. |
|
2. |
A coworker of Sexton'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 Cooler? Show your calculations. |
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