Tilton Food Warehouse Club sells food and other items in bulk to its members.Tilton is very selective in the products it sells because of limited shelf space.It has been asked by a canned vegetables manufacturer to consider adding three of its canned food items.The following information is available regarding each of the possible canned food items:
$\begin{array}{lrrr}
&\underline{\text { Item \#1} }&\underline{\text { Item \#2 }}&\underline{\text { Item \#3 }}\
\text { Sales price per unit } & \$ 3.50 & \$ 4.50 & \$ 7.00 \
\text { Cost to purchase } & 1.25 & 2.00 & 3.00 \
\text { Units per foot of shelf space }&3&2&1
\end{array}$
Assuming that there is unlimited demand for all items,if Tilton has 15 feet of shelf space available,which of the following statements is true if they wish to maximise profits?

Question

Quizplus · Accepted Answer

To maximize profits, Tilton should calculate the profit per unit of shelf space for each item. For Item #1, the profit per unit is $3.50 - $1.25 = $2.25, and with 3 units per foot, the profit per foot is $2.25 * 3 = $6.75. For Item #2, the profit per unit is $4.50 - $2.00 = $2.50, and with 2 units per foot, the profit per foot is $2.50 * 2 = $5.00. For Item #3, the profit per unit is $7.00 - $3.00 = $4.00, and with 1 unit per foot, the profit per foot is $4.00 * 1 = $4.00. Therefore, Item #1 offers the highest profit per foot of shelf space, making it the best choice for maximizing profits.

Tilton Food Warehouse Club Sells Food and Other Items in Bulk