Each morning Iriza Sandoval stocks the drink case at Iriza s
Each morning, Iriza Sandoval stocks the drink case at Iriza’s Beach Hut on Vancouver Island. Iriza’s Beach Hut has 35 linear metres of refrigerated display space for cold drinks. Each linear metre can hold either 15 341-mL cans or 12 551-mL plastic or glass bottles. Iriza’s Beach Hut sells three types of cold drinks:
1. Grand-Cola in 341-mL cans, for \$1.50 per can
2. Fizzle Pop in 551-mL plastic bottles, for \$1.75 per bottle
3. Value-Soda in 551-mL glass bottles, for \$2.30 per bottle
Iriza’s Beach Hut pays its suppliers the following:
1. \$0.25 per 341-mL can of Grand-Cola
2. \$0.40 per 551-mL bottle of Fizzle Pop
3. \$0.80 per 551-mL bottle of Value-Soda
Iriza’s Beach Hut’s monthly fixed expenses include the following:
Hut rental ................................................................................................. \$ 365
Refrigerator rental..................................................................................... 65
Iriza's salary.............................................................................................. 1,750
Total fixed expenses.................................................................................. \$2,180
Each day, Iriza’s Beach Hut can sell all the drinks in the display case.
Requirements
1. What is Iriza’s Beach Hut’s constraining factor? What should Iriza stock to maximize profits? What is the maximum contribution margin she could generate from refrigerated drinks each day?
2. To provide variety to customers, suppose Iriza refuses to devote more than 20 linear metres and no fewer than 2 linear metres to any individual product. Under this condition, how many linear metres of each drink should Iriza stock? How many units of each product will be available for sale each day?
3. Assuming the product mix calculated in Requirement 2, what contribution margin will Iriza generate each day?
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