Question

“Sensitivity analysis with data tables,” use the Scenario Manager to display a report summarizing profit for the following scenarios: Scenario Price Unit cost Fixed Cost High cost/high price $6.00 $1.25 $70,000.00 Medium cost/ medium Price $5.00 $1.00 $50,000.00 Low cost/low price $2.60 $0.50 $30,000.00

Answer 1

Decisions to be Made Introducing the new, smaller eTablet to market Supplier Contract Advertising Budgot 5350 $75,000,000 $35,000,000 Competitor Pricing Base Demand Market Size 200 1,000,000 5,000,000 You work on the new product development team for your company's new tablet computer offering, a smaller versio of your wildly popular eTablet line. You have been given thetask of determining threeimportant decisions for this new product. First, you have been asked to determine the price for this product. Pricing is a tricky decision. You dont want to pricethe new tablet too high because few customers will choosethe new product over your full-sized tablet offerings and you risk losing salesto your aggressively priced competitors products. You don't want to price the product too low, becauseyou want to earn as much revenue as possible from the product. Second, you must determine whereto set the marketing budget for thenew product. You know that therewill be a base demand for your product that comes from your loyal customers who will buy just about anything you produce. Beyond that you also know that every dollar you spend on advertising will increasethe demand for your product. Ofcourse, there is a limit to how much money you will want to spend on advertising because eventually more money spent on advertising will havelittle effect on demand and will reducethe profitability of the new product. Finally, you have been asked to help decide how much money to prepay to the suppliers of the raw materials of the new product to reduce the overall costs of these materials. Every dollar you spend on prepaying your suppliers will reduce thecosts of these materials and will ensure that your competitors don't have access to these materials. You havecompleted a spreadsheet model to aid in your analysis. Use the What If Analysis'options in Excel to help you determinethe right Variable Cost Calc Profitability Variable Production Costs Prepaid Discount Amount Ad justed Variable Costs 199 $26 $173 Total Revenue -Total Variable Costs -Total Fixed Costs 551,250,000 $110,000,000 169,171,645 Demand Calculations Total Profit Price Demand Factor Total Demand -75 1575000 Pu Decision Set 1 Decision Set 2 Decision Set 3 Decision Set 4 Price (C3) 200 $25 Supplier Contract (CA) $50,000,000 $75,000,000 $100,000,000 $20,000 Advertising (C5 000,00000$329 5,000,000 $50,000 $50,000 advertisin ding, and prepaid supplier contract for your n ew product Which Scenario is most fitable?

Identify the following cost as either fixed, variable or mixed (semi-variable). The horizontal axis refers to the number of units produced. The vertical axis refers to the cost per unit at that level of production.

            This is a variable cost.

4-6: Identify the following cost as either fixed, variable or mixed (semi-variable). The horizontal axis refers to the number of units produced. The vertical axis refers to the total cost incurred for all of the units produced.

This is a mixed cost

4-7: Identify the following cost as either fixed, variable or mixed (semi-variable). The horizontal axis refers to the number of units produced. The vertical axis refers to the total cost incurred for all of the units produced.

This is a variable cost