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Calculate contribution margin per case of each type of drink

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Reference no: EM133000445

Question - 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.

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.

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

Reference no: EM133000445

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