The Snack Shack is a take-out food store at a popular beach resort. The owner is

Question

The Snack Shack is a take-out food store at a popular beach resort. The owner is deciding how much refrigerator space to devote to four different drinks. Pertinent data on these four drinks are as follows:

Selling price per case: Cola $18.80 Lemonade $20.75 Punch $26.90 Orange Juice $39.30

Variable cost per case: Cola $13.80 Lemonade $16.25 Punch $20.10 Orange Juice $30.10

Cases sold per foot of shelf space per day: Cola 7 Lemonade 12 Punch 24 Orange Juice 6

She 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.

What shelf space allocation for the four drinks would you recommend for the Snack Shack? Show your calculations. Please detail how you figure out the feet of shelf space per drink. I cannot figure it out.

Explanation / Answer

Cola

Lemonade

Punch

Orange juice

Selling price

$ 18.80

$ 20.75

$ 26.90

$ 39.30

Variable cost

$ 13.80

$ 16.25

$ 20.10

$ 30.10

Contribution margin per case

$ 5.00

$ 4.50

$ 6.80

$ 9.20

No. of cases per foot of shelf space

7

12

24

6

Contribution margin per foot of shelf space

$ 35.00

$ 54.00

$ 163.20

$ 55.20

Ranking for allotment of shelf space

4

3

1

2

The shelf space is a limited resource for the snack shack. The drink with the highest contribution margin per foot of shelf space shall be allotted maximum possible shelf space and the drink with the lowest contribution margin per foot of shelf space shall be allotted minimum shelf space.

1st stock maximum constraint of

6

feet shelf space with product having the

$ 163.20

CM:

Punch

Next minimum constraint of

1

feet shelf space with product having the

$ 35.00

CM:

Cola

Next minimum constraint of

1

feet shelf space with product having the

$ 54.00

CM:

Lemonade

Stock the remaining

4

feet shelf space with product having the

$ 55.20

CM:

Orange juice

Shelf space allotted

Cases per feet of shelf space

Cases for sale

Punch

6 feet

24 cases

144 cases

Cola

1 foot

7 cases

7 cases

Lemonade

1 feet

12 cases

12 cases

Orange juice

4 foot

6 cases

24 cases

Cola

Lemonade

Punch

Orange juice

Selling price

$ 18.80

$ 20.75

$ 26.90

$ 39.30

Variable cost

$ 13.80

$ 16.25

$ 20.10

$ 30.10

Contribution margin per case

$ 5.00

$ 4.50

$ 6.80

$ 9.20

No. of cases per foot of shelf space

7

12

24

6

Contribution margin per foot of shelf space

$ 35.00

$ 54.00

$ 163.20

$ 55.20

Ranking for allotment of shelf space

4

3

1

2

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