FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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**The Wave Crave Case Study**

**Overview:**
The Wave Crave is a take-out food store at a popular beach resort. Cindy Smith, the owner, is deciding how much refrigerator space to allocate to four different drinks. The drinks have specific sales data:

- **Shelf Space Constraint:** 12 feet total, with a minimum of 1 foot and a maximum of 6 feet per drink.

**Data Table:**
| Drink                 | Selling Price/Case | Variable Cost/Case | Cases Sold/Foot/Day |
|-----------------------|---------------------|--------------------|---------------------|
| Cola                  | $19.25              | $14.00             | 8                   |
| Lemonade              | $19.50              | $15.60             | 22                  |
| Punch                 | $27.30              | $20.70             | 25                  |
| Natural Orange Juice  | $38.75              | $29.90             | 23                  |

**Requirements:**

1. **Calculate Contribution Margin per Case for Each Drink:**
   - **Formula:** Contribution Margin = Selling Price - Variable Cost

2. **Shelf Space Allocation:**
   - A coworker suggests maximizing shelf space for drinks with the highest contribution margin. Evaluate this strategy.

3. **Recommendation for Shelf Space Allocation:**
   - Propose a shelf space distribution for the four drinks, supported by calculations.

**Summary:**
This case requires analyzing each drink's financial contribution and strategizing shelf space allocation to optimize profit, considering logistical constraints.
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Transcribed Image Text:**The Wave Crave Case Study** **Overview:** The Wave Crave is a take-out food store at a popular beach resort. Cindy Smith, the owner, is deciding how much refrigerator space to allocate to four different drinks. The drinks have specific sales data: - **Shelf Space Constraint:** 12 feet total, with a minimum of 1 foot and a maximum of 6 feet per drink. **Data Table:** | Drink | Selling Price/Case | Variable Cost/Case | Cases Sold/Foot/Day | |-----------------------|---------------------|--------------------|---------------------| | Cola | $19.25 | $14.00 | 8 | | Lemonade | $19.50 | $15.60 | 22 | | Punch | $27.30 | $20.70 | 25 | | Natural Orange Juice | $38.75 | $29.90 | 23 | **Requirements:** 1. **Calculate Contribution Margin per Case for Each Drink:** - **Formula:** Contribution Margin = Selling Price - Variable Cost 2. **Shelf Space Allocation:** - A coworker suggests maximizing shelf space for drinks with the highest contribution margin. Evaluate this strategy. 3. **Recommendation for Shelf Space Allocation:** - Propose a shelf space distribution for the four drinks, supported by calculations. **Summary:** This case requires analyzing each drink's financial contribution and strategizing shelf space allocation to optimize profit, considering logistical constraints.
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