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

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?