Question
The sensitivity analysis in the Quality Sweaters example was on the response rate. Suppose now that the response rate is known to be 8%, and
The sensitivity analysis in the Quality Sweaters example was on the response rate. Suppose now that the response rate is known to be 8%, and the company wants to perform a sensitivity analysis on the number mailed. After all, this is a variable under direct control of the company. Create a one-way data table and a corresponding line chart of profit versus the number mailed, where the number mailed varied from 80,000 to 150,000 in increments of 10,000. Does it appear, from the results you see here that there is an optimal number to mail, from all possible values, that maximizes profit? Write a concise memo to management about your results. Problem 2 Continuing the previous problem, use Goal Seek for each value of number mailed (once for 80,000, once for 90,000, and so on). For each, find the response rate that allows the company to break even. Then chart these values, where the number mailed is on the horizontal axis, and the breakeven response rate is on the vertical axis. Explain the behavior in the chart in a brief memo to management.
show it step by step in excel with the formula how to use what to do thanks.
Number mailed | 100000 | Total Revenue | $320,000 | Total_cost | |||||||
Fixed cost of printing | $20,000 | Total_Revenue | |||||||||
Order inputs | Total variable cost of printing mailing | $25,000 | Variable_cost_of_printing_mailing | ||||||||
Average order | $40 | Total variable cost of orders | $257,600 | Variable_cost_per_order | |||||||
Variable cost per order | $32.20 | Total cost | $302,600 | ||||||||
Profit | $17,400 | ||||||||||
Question 1 - sensitivity of profit to Number Mailed | | ||||||||||
Number Mailed | Profit | ||||||||||
$ 17,400 | |||||||||||
$ 80,000 | $ 62,399,955,000 | ||||||||||
$ 90,000 | $ 70,199,955,000 | ||||||||||
$ 100,000 | $ 77,999,955,000 | ||||||||||
$ 110,000 | $ 85,799,955,000 | ||||||||||
$ 120,000 | $ 93,599,955,000 | ||||||||||
$ 130,000 | $ 101,399,955,000 | ||||||||||
$ 140,000 | $ 109,199,955,000 | ||||||||||
$ 150,000 | $ 116,999,955,000 | ||||||||||
1% | $ (37,200) | ||||||||||
10% | $ 33,000 | ||||||||||
Question 2 - breakeven response rate | |||||||||||
Solve the following equation with Goal Seek, using the Response_rate cell as the changing cell: | |||||||||||
Profit | = | $0 | |||||||||
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Certainly Lets address the problem step by step Part 1 Sensitivity Analysis on Number Mailed Well begin by setting up a oneway data table in Excel to analyze how the profit changes with the number of ...Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started