Your firm sells club soda in both grocery stores and convenience stores.You have a budget of $550 for store displays and must decide how to allocate this budget between grocery stores and convenience stores to maximize the total number of sales.The following table shows the total number of units that can be sold in grocery stores and convenience stores,according to the number of displays in each type of store.Displays in grocery stores cost $150 each and displays in convenience stores cost $100 each. Given the above information,at the optimal choice with a budget of $550,the last dollar spent on grocery store displays yields
A)3.0 additional sales.
B)3.3 additional sales.
C)300 additional sales.
D)500 additional sales.

Question

Your firm sells club soda in both grocery stores and convenience stores.You have a budget of $550 for store displays and must decide how to allocate this budget between grocery stores and convenience stores to maximize the total number of sales.The following table shows the total number of units that can be sold in grocery stores and convenience stores,according to the number of displays in each type of store.Displays in grocery stores cost $150 each and displays in convenience stores cost $100 each.  Given the above information,at the optimal choice with a budget of $550,the last dollar spent on grocery store displays yields
A)3.0 additional sales. 
B)3.3 additional sales. 
C)300 additional sales. 
D)500 additional sales.

Quizplus · Accepted Answer

To maximize the total number of sales, we need to compare the incremental sales generated by spending the last dollar on grocery store displays versus convenience store displays. 
Each grocery store display costs $150 and generates an additional 5 units of sales, while each convenience store display costs $100 and generates an additional 3 units of sales. 
Thus, for the last dollar spent, we should choose the option with the highest incremental sales per dollar, which is 0.033 (3.3/100) for grocery store displays and 0.03 (3/100) for convenience store displays. 
Therefore, we should allocate the entire budget of $550 towards grocery store displays, which would yield an additional 18 units of sales (5 units per display * 11 displays), resulting in an incremental sales per dollar of 0.033. The last dollar spent on grocery store displays would, therefore, yield an additional 0.033 units of sales.

Your Firm Sells Club Soda in Both Grocery Stores and Convenience