Sensational Soft Drinks Makes Three Products: Iced Tea, Soda, and Lemonade

question 44

Essay

Sensational Soft Drinks makes three products: iced tea, soda, and lemonade. The following data are available:? $$\begin{array} { l r r r } & \text { Iced Tea } & \text { Soda } & \text { Lemonade } \\\text { Sales price per unit } & \$ 0.90 & \$ 0.60 & \$ 0.50 \\\text { Variable cost per unit } & 0.30 & 0.15 & 0.10 \\\text { Contribution margin per unit } & \underline { \$ 0.60 } & \mathbf { \$ 0 . 4 5 } & \mathbf { \$ 0 . 4 0 }\end{array}$$ Sensational is experiencing a bottleneck in one of its processes that affects each product as follows:


(a)Using a theory of constraints (TOC) approach, rank the products in terms of profitability.
(b)What price for lemonade would equate its profitability (contribution margin per bottleneck hour) to that of soda?

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Definitions:

Stockholders' Equity

The residual interest in the assets of a corporation after deducting its liabilities, representing ownership equity.

Net Income

Represents the total profit of a company after all expenses and taxes have been deducted from total revenue.

Preferred Dividends

Preferred dividends are payments made to preferred shareholders before any dividends are distributed to common shareholders.

Return On Common Stockholders' Equity

A financial ratio that measures the amount of net income returned as a percentage of shareholders equity, indicating the profitability from the shareholders' perspective.