Question

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i . X Data Table Ned's Beach Hut sells three types of cold drinks: 1. Just - Soda in 341-mL cans for $1.45 per can 2. Fizzle Pop in 551-ml plastic bottles for $1.75 per bottle 3. Right - Cola in 551-ml glass bottles for $2.30 per bottle Ned's Beach Hut pays its suppliers the following: 1. $0.20 per 341-mL can of Just-Soda 2. $0.35 per 551-ml bottle of Fizzle Pop 3. $0.75 per 551-ml bottle of Right - Cola Ned's Beach Hut's monthly fixed expenses include the following: Hut rental $ 370 Refrigerator rental 75 1,750 Ned's salary Total fixed expenses 2,195 $

Each​ morning, Ned Imery stocks the drink case at Ned​'s Beach Hut in Victoria. Ned​'s Beach Hut has 42 linear metres of refrigerated display space for cold drinks. Each linear metre can hold either18 341-mL cans or 12 ​551-mL plastic or glass bottles.

Each​ day, Ned​'s Beach Hut can sell all the drinks in the display case.

Answer 1

Requirement 1:

The constraining factor is refrigerated display space i.e. 42 metres of linear shelf space.

Ned's should stock the drink with the highest contribution margin.

Ned's Beach Hut

Product Mix Analysis

	Just Soda 341 ml Cans	Fizzle Pop 551-mL Bottles	Right Cola 551-mL Bottles
(a) Selling Price per unit	$ 1.45	$ 1.75	$ 2.30
(b) Variable cost per unit	$ 0.20	$ 0.35	$ 0.75
(c) Contribution Margin per unit (a-b)	$ 1.25	$ 1.40	$ 1.55
(d) Units storage per linear metre	18	12	12
(e) Contribution Margin per linear metre (c*d)	$ 22.50	$ 16.80	$ 18.60

We should produce the product which has the highest contribution margin per unit of Constraining factor.

Just Soda (18 cans per linear metre) has the highest contribution margin of $ 22.50 per linear metre of shelf space.

Ned's should devote all its shelf space to Just Soda.

The maximum contribution margin that Ned's could generate each day from refrigerated drinks is $ 22.50 * 42 = $945.

Requirement 2:

1st stock maximum constraint of 30 linear m with product having the highest CM i.e.($22.50)= 30*18 = 540 cans of Just Cola

Next minimum constraint of 4 linear m with product having the lowest CM(i.e $16.80)= 4*12= 48 Bottles of Fizzle Pop

Stock the remaining 8 linear m with product having the second highest CM (i.e. $18.60) = 8*12 = 96 Bottles of Right-Cola.

	Units for Sale
Just-Soda in 341 mL cans	540 cans
Fizzle Pop in 551 mL Bottles	48 Bottles
Right-Cola in 551 mL Bottles	96 Bottles

Requirement 3:

Calculation of contribution margin per day:

	Workings	Contribution Margin
Just-Soda in 341 mL cans	540*1.25 = 675	$ 675
Fizzle Pop in 551 mL Bottles	48*1.40= 67.20	$ 67
Right-Cola in 551 mL Bottles	96*1.55 = 148.80	$ 149
Total		$ 891