Chapter 11, Problem 11.27E

Relevant costs, contribution margin, product emphasis. The Beach Comber is a take-out food store at a popular beach resort. Sara Miller, owner of the Beach Comber, is deciding how much refrigerator space to devote to four different drinks. Pertinent data on these four drinks are as follows:

Miller 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.

1. 1. Calculate the contribution margin per case of each type of drink.
2. 2. A coworker of Miller’s recommends that she maximize the shelf space devoted to those drinks with the highest contribution margin per case. Do you agree with this recommendation? Explain briefly.
3. 3. What shelf-space allocation for the four drinks would you recommend for the Beach Comber? Show your calculations.