Problem
Robinson's Grocery Store is a small corner grocery store in rural Montana, and shelf space is very limited. Management must decide how to allocate shelf space for salsa. Robinson's has been given an opportunity to sell a very popular brand of salsa produced by Bobby Tutor, a popular rock star. The unique bottle is taller and thinner than the other popular brands on the market, increasing its visibility on the shelf. The sales and cost data for the new salsa and the three other brands presently sold are shown below:
Salsa 1 Salsa2 Salsa 3 New Salsa
Sales Price Per jar $2.50 $2.75 $3.00 $4.00
Cost to purchase 1.25 1.35 1.50 3.20
Contribution margin $1.25 $1.40 $1.50 $0.80
Bottles per foot of shelf space 10 9 7 12
Required
A. Rank the salsas based on expected revenue if each is given 10 feet of shelf space and all bottles are expected to be sold.
B. Based on the information given, which salsa should get the most shelf space? Why?
C. What qualitative factors should be considered in this decision? How would these factors impact thedecision?