Problem Set 03 - Analyzing Using Spreadsheets
Problem Set 03 - Analyzing Using Spreadsheets
4. Honeydukes Co.
Refer to Honeydukes Co. problem in Problem Set 02.
a. What is the breakeven value of the open-market grape price?
b. Using a data table, show how profit varies as a function of the price set for
raisins. Cover a range from $1.80 to $2.80 in steps of $0.10.
c. Using a data table, show how profit varies as a function of the price set for
raisins and the amount of grapes brought under contract. Cover a range from
$1.80 to $2.80 (in steps of $0.10) for the price and a range from 0.5 million
pounds to 1.5 million pounds of grapes bought under contract (in steps of 0.1
million).
d. What happens to profit in the following scenarios?
Scenario Open-market Grape Price/lb
Low $0.25
Medium $0.30
High $0.35
5. Ollivanders Co.
Refer to Ollivanders Co. problem from Problem Set 01.
a. Florian Fortescue, VP of Marketing at Ollivanders Co., is apprehensive
about the sales group’s estimate of the number of units sold. What if the
figure is incorrect? Florian wants to understand what the revenue,
contribution margin and profit before taxes would be if the number of units
sold at $129.95 varied from 500 to 5000, in increments of 500 units. Build
an appropriate data table to help him. Contribution margin is calculated by
subtracting variable costs from revenue and represents the amount of
revenue that contributes to covering the fixed expenses of the company.
b. What happens to the data table in (a), when manufacturing cost per unit
increases from $75.75 to $95 and marketing cost is reduced from $75,000
to $60,000?
c. Florian also wants to see how profit is affected by different selling prices
and units sold. The company has a policy that all prices must end in 9.95.
So, Florian wants to use prices that range from $119.95 to $159.95 with an
increment of $10. As before, units sold can be varied from 500 to 5000, in
increments of 500. Build an appropriate data table for him. What happens
to the profits in this data table if the variable manufacturing cost is reduced
to $70 per unit?
d. Create a data table showing the effect of change of marketing costs from
$25,000 to $125,000 in increments of $25,000 on profit before taxes.
e. How does the profit vary as marketing costs vary from $25,000 to $125,000
in increments of $25,000 and prices vary from $99.95 to $149.95 in
increments of $5?
f. Show the effect on profit for the following three scenarios:
Scenario Unit Price Units Sold
Worst case $99.95 2500
Likely case $129.95 3000
Best case $149.95 4000
6. Flying Ford Taxi Co.
Refer to the Flying Ford Taxi Co. problem in Problem Set 1.
a. How does the revenue vary with variable fee and fixed fee when 1) variable
fee is charged as a percentage of fare and 2) when variable fee is charged per
dispatch? Use the appropriate data table.
b. How does the revenue vary if fleet size varies from 500 to 2000?
c. How does the revenue vary if the average fare varies between $10 and $20?
d. How does the revenue vary if the average number of daily dispatches vary
between 5 to 10?
8. Project Pragati
Refer to Project Pragati problem from Problem Set 01.
a) How does the total profit depend on the percentage increase in product sales?
b) How do the profits for both the versions vary with the prices of the versions?
9. Acme Company
Acme Company is organizing a workshop for aspiring online content creators.
The fixed cost for organizing such workshops in $15,000. It must pay the 10
speakers $700 each and the hotel $300 for food/lodging costs for all participants.
Acme now needs to decide how much to charge each workshop participant (who
is not a speaker). Last year, Acme charged $1200 for each such participant and
the number of such participants who registered for the workshop was 42.
a) Create the base case spreadsheet model to help Acme decide how much to
charge the participants. You can use the last year’s charges and no. of registered
participants to create the base case model.
b) How does Acme’s profit vary if the charge for the participants varies from
$600 to $1500? Use the appropriate data table.
c) How many paying participants must register for Acme to breakeven?
Each product category has its own marketing plan because each category has a
different primary target market. The estimate for selling and admin costs for these
product lines is $17500, overall. SwimSkin is currently in the 35% income tax
bracket. The payroll estimate is a little complicated. At last year’s sales volume,
the apparel operations manager estimated that it took equivalent of five
employees to produce the products and process their sales. The operations
manager forecasts that if the total swimsuit sales reach 200,000 units, the
equivalent of one additional half-time employee will be needed to handle the
workload. The operations manager has also forecasted that for each additional
50,000 units sold, the equivalent of one half-time employee will be needed. Now,
based on market research, staff in the sales and marketing groups have prepared
a table with the swimsuit data, assuming the sales price stay the same as in the
past year (see table below).
Product Categories
Adults’ Adults’ Children’s Children’s
Racers Two-Piece Racers Two-Piece
Suits Suits
Option 1:
Continued
marketing
Marketing $7000 $10000 $8000 $8000
expense
Units sold 10000 10000 5000 7000
Option 2:
Discount
Marketing $5000 $10000 $4000 $4000
Expense
Units sold 6000 15000 3000 4000
Option 3:
College
Marketing $1000 $3500 $3500 $4500
Expense
Units sold 12500 6000 3500 4500
Option 4: High
End
Marketing $5000 $6000 $5000 $5000
Expense
Units sold 6500 6000 5000 5000
Option 5:
Balanced
Marketing $7500 7500 5000 5000
Expense
Units sold 11500 12500 8000 9000