Each morning, Larry Rouse stocks the drink case at Larry\'s Beach Hut in Myrtle

Question

Each morning, Larry Rouse stocks the drink case at Larry's Beach Hut in Myrtle Beach, South Carolina. The drink case has 90 linear feet of refrigerated drink space. Each linear foot can hold either sixsix 12ounce cans orthreethree 20-ounce bottles. Table data Larry's Beach Hut sells three types of cold drinks: 1. Yummy Yummy Time in 12-oz. cans for $ 1.60$1.60 per can 2. Yummy Yummy Time in 20-oz. bottles for $ 2.00 per bottle 3. Pep minus ColaPep-Cola in 20-oz. bottles for $ 2.45 per bottle Larry's Beach Hut pays its suppliers: 1.$ 0.15 per 12-oz. can of TimeYummy Time 2.$ 0.40$ per 20-oz. bottle of TimeYummy Time 3.$ 0.55 per 20-oz. bottle of Pep minus ColaPep-Cola Larry Beach Hut's monthly fixed costs include: Hut rental Refrigerator rental Larry's salany Total fixed costs $380 70 1,400 $1,850

Explanation / Answer

Requirement 1:

The contraining factor is:

Larry should maximize profit by stocking the items which give the highest contribution margin per linear foot of refrigerator space.

Decision: Stock Yummy Time 12 oz.cans.

Requirement 2:

Larry's Beach Hut should stock its shelves as follows:

First stock 60 linear feet with the product that has the highest CM per linear foot : Yummy Time 12 oz. cans.

Next stock 30 linear feet with the product that has the next highest CM per linear foot : Pep Cola 20 oz. bottles

Linear Feet of Shelf Space

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