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1. K. Holman operates a newspaper kiosk in Grand Central Station in New York City,...

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Accounting

1. K. Holman operates a newspaper kiosk in Grand Central Station in New York City, a major commuter rail terminus in downtown Manhattan. The kiosk is 300 cubic feet (length x width x height) and Holman uses every cubic inch of it to stock newspapers, magazines, and snack foods.

Holman estimates that the contribution margin ratios on newspapers, magazine, and snack food items are 10%, 25% and 20%, respectively. In addition, for equivalent sales in dollars, newspapers take up 5 times as much space as magazine and 10 times as much space for snacks. However, because newspapers are the primary draw for the kiosks customers, Holman believes that at least 50% of the space (i.e., 150 cubic feet) must be allocated to newspapers. Holman also thinks that the 10% of her available space is the maximum shed want to devote to snacksthat is, she wouldnt sell more than what she could cram into 10% of the space, but she is willing to sell less.

1a) What is the optimal allocation of space to newspapers, magazine, and snack food items?

1b) Assume that Holman allocates space according to your recommendation. For Holman to breakeven on the kiosk rental charge of $2,700 per month, how much revenue must the kiosk generate per cubic foot each month?

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