question archive Big M Superstore is a large discount supermarket
Big M Superstore is a large discount supermarket
Subject:AccountingPrice: Bought3
Big M Superstore is a large discount supermarket. Profits have declined, so the manager has collected data on revenues and costs for different food categories. The following data pertain to some of the frozen foods that Big M Superstore sells. To facilitate comparisons, the manager has listed average price and cost for each category in equivalent square-foot packages:
Ice CreamJuicesFrozenDinnersFrozenVegetables
Selling price per unit (square-foot package) (VND’000)12013024090
Variable costs per unit (square-foot package) (VND’000)8010020570
Minimum square footage required24242424
Maximum square footage allowed100100100100
The manager wants a maximum of 260 square feet devoted to the four categories in this table.RequiredGiven the manager’s constraints, and assuming that the store can sell whatever is displayed on the shelves, what shelf mix (i.e., what number of square feet for each category) will maximize Big M Superstore’s profit from these four categories? [8 marks]What other factors might the manager consider in deciding on the amount of shelf space per category? [7 marks]Some people claim that fixed costs are always irrelevant in decision-making. Discuss.
