The is a$$ take$-$out food store at a popular beach resort. $,$ owner of the $,$ is deciding how much refrigerator space to devote to four different drinks. Pertinent data on these four drinks are as$$ follows:

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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.

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Question content area bottom

Part $1$

Requirement $1.$ Calculate the contribution margin per case of each type of drink.

Natural

Cola

Lemonade

Punch

Orange Juice

Selling price per case

$$19\mathrm{.}25$

$$20\mathrm{.}60$

$$27\mathrm{.}70$

$$38\mathrm{.}80$

Variable cost per case

$13\mathrm{.}80$

$16\mathrm{.}90$

$20\mathrm{.}90$

$30\mathrm{.}30$

Contribution margin per case

$$5\mathrm{.}45$

$$3\mathrm{.}70$

$$6\mathrm{.}80$

$$8\mathrm{.}50$

Part $2$

Requirement $2.$ A coworker of $\text{'}$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.

A$.$

This recommendation does not make sense. The company should allocate equal shelf space to each product so the customer has plenty of options.

B$.$

This recommendation makes sense. It will allow the company to maximize their contribution margin.

C$.$

This recommendation does not make sense. It fails to recognize that the company has limited shelf space and therefore wants to maximize the contribution margin per foot of shelf space.

Your answer is correct.

Part $3$

Requirement $3.$ What$$ shelf$-$space allocation for the four drinks would you recommend for the $?$ Show your calculations.

Begin by calculating the amount that should be used to determine the allocation. $($Round your answers to the nearest$$ cent.$)$

Natural

Cola

Lemonade

Punch

Orange Juice

Contribution margin per case

$$5\mathrm{.}45$

$$3\mathrm{.}70$

$$6\mathrm{.}80$

$$8\mathrm{.}50$

x Cases sold per foot of shelf space per day

$7$

$20$

$22$

$4$

Daily contribution margin per ft of shelf space

$$38\mathrm{.}15$

$$74\mathrm{.}00$

$$149\mathrm{.}60$

$$34\mathrm{.}00$

Part $4$

Allocate the shelf space to each product and show the effect it will have on the $\text{'}$s operations. $($Round your answers to the nearest$$ cent.$)$

Daily Contribution Margin

Total

Feet of

per Foot of

Contribution Margin

Shelf Space

Shelf Space

per Day

Cola

Lemonade

Punch

Natural Orange Juice

Total