25-13 Fixed costs are not affected by the choice of products todisplay. Based only on this information, it is apparent thathardcover books have a higher contribution margin per unit andshould be the product emphasized. However, managers also have toconsider the constraint or limited shelf space. Management at Bragghas determined that each linear foot of bookshelves can display 10hardcover book or 20 paperback books. Remember that the decisionrule for constraints is to emphasize the product with the highestcontribution margin per unit of the constraint. E25-13 shows thetotal contribtuion margin with the display space constraint.
Hard Cover book Paperback books Contribution margin per book $8.40 $4.80 Books per linear foot of display space x10 x20 Total contribution margin per linear foot of display space $84.00 $96.00
Bragg can generate more profits per footof shelving if paperback books are displayed. Therefore, thecompany should emphasize paperback books. However, Bragg, shouldalso consider the market-what do airport shoppers want? Bragg candisplay twice as many paperback books than hardcover books. Willthe increased variety of titles displayed increase sales andinventory turnover? Will it lose sales if only paperback books aredisplayed? Other factors must also be considered when making salesmixdecisions
25-13 Fixed costs are not affected by the choice of products todisplay. Based only on this information, it is apparent thathardcover books have a higher contribution margin per unit andshould be the product emphasized. However, managers also have toconsider the constraint or limited shelf space. Management at Bragghas determined that each linear foot of bookshelves can display 10hardcover book or 20 paperback books. Remember that the decisionrule for constraints is to emphasize the product with the highestcontribution margin per unit of the constraint. E25-13 shows thetotal contribtuion margin with the display space constraint.
| Hard Cover book | Paperback books | ||
| Contribution margin per book | $8.40 | $4.80 | |
| Books per linear foot of display space | x10 | x20 | |
| Total contribution margin per linear foot of display space | $84.00 | $96.00 |
Bragg can generate more profits per footof shelving if paperback books are displayed. Therefore, thecompany should emphasize paperback books. However, Bragg, shouldalso consider the market-what do airport shoppers want? Bragg candisplay twice as many paperback books than hardcover books. Willthe increased variety of titles displayed increase sales andinventory turnover? Will it lose sales if only paperback books aredisplayed? Other factors must also be considered when making salesmixdecisions
