Funds available $10,000
Costs of Grapes per Bottle Selling Price per Bottle
Year 1 Year 2
Petite Sirah $0.80 $0.75 Petite Sirah
Sauvignon Blanc $0.70 $0.85 Sauvignon Blanc
Demand created (bottles) per dollar of advertising
Year 1 Year 2
Petite Sirah 5 6
Sauvignon Blanc 8 10
Percentage of constraints on Petite Sirah sold each year
Min 40%
Max 70%
Production, Sales plan Dollars on advertising
Year 1 Year 2
Petit Sirah Produced 4469 54903 Petit Sirah
Sauvignon Blanc Produced 6704 23530 Sauvignon Blanc
Petit Sirah Available 4469 54903
Sauvignon Blanc Available 6704 23530 Percentage constraints on Petit Sirah
>= >=
Petit Sirah Sold 4469 54903 Min
Sauvignon Blanc Sold 6704 23530
<= <= Actual
Petit Sirah Demand 4469 54903
Sauvignon Blanc Demand 6704 23530 Max
Cash Constraints
Year 1 Year 2
Spent $10,000 $72,682
<= <=
Available $10,000 $72,682
Profit $72,682 $544,981
Total Profit $617,663
Year 1 Year 2
$8.00 $8.25
$7.00 $7.00
Year 1 Year 2
$894 $9,151
$838 $2,353
traints on Petit Sirah
Year 1 Year 2
4469 31373
<= <=
4469 54903
<= <=
7821 54903
Funds available $10,000
Costs of Grapes per Bottle Selling Price per Bottle
Year 1 Year 2
Petite Sirah $0.80 $0.75 Petite Sirah
Sauvignon Blanc $0.70 $0.85 Sauvignon Blanc
Demand created (bottles) per dollar of advertising
Year 1 Year 2
Petite Sirah 5 6
Sauvignon Blanc 8 10
Percentage of constraints on Petite Sirah sold each year
Min 40%
Max 70%
Production, Sales plan Dollars on advertising
Year 1 Year 2
Petit Sirah Produced 4469 54903 Petit Sirah
Sauvignon Blanc Produced 6704 23530 Sauvignon Blanc
Petit Sirah Available 4469 54903
Sauvignon Blanc Available 6704 23530 Percentage constraints on Petit Sirah
>= >=
Petit Sirah Sold 4469 54903 Min
Sauvignon Blanc Sold 6704 23530
<= <= Actual
Petit Sirah Demand 4469 54903
Sauvignon Blanc Demand 6704 23530 Max
Cash Constraints
Year 1 Year 2
Spent $10,000 $72,682
<= <=
Available $10,000 $72,682
Profit $72,682 $462,626 The new profit is now $535,308 which is is 13.3% lower from the
original profit if everything else remains the same (e.g. same
Total Profit $535,308 business plan). The optimal business plan remains the same and
the business is still very profitable, considering an investment of
$10,000 can generate a return of more than 50,000%
Year 1 Year 2
$8.00 $8.25
$7.00 $3.50
Year 1 Year 2
$894 $9,151
$838 $2,353
traints on Petit Sirah
Year 1 Year 2
4469 31373
<= <=
4469 54903
<= <=
7821 54903
which is is 13.3% lower from the
emains the same (e.g. same
ness plan remains the same and
e, considering an investment of
more than 50,000%
Funds available $10,000
Costs of Grapes per Bottle Selling Price per Bottle
Year 1 Year 2
Petite Sirah $0.80 $0.75 Petite Sirah
Sauvignon Blanc $0.70 $0.85 Sauvignon Blanc
Demand created (bottles) per dollar of advertising Holding Cost per Bottle each year
Year 1 Year 2
Petite Sirah 5 6
Sauvignon Blanc 8 10
Percentage of constraints on Petite Sirah sold each year
Min 40%
Max 70%
Production, Sales plan Dollars on advertising
Year 1 Year 2
Petit Sirah Produced 4469 54903 Petit Sirah
Sauvignon Blanc Produced 6704 23530 Sauvignon Blanc
Petit Sirah Available 4469 54903
Sauvignon Blanc Available 6704 23530 Percentage constraints on Petit Sirah
>= >=
Petit Sirah Sold 4469 54903 Min
Sauvignon Blanc Sold 6704 23530
<= <= Actual
Petit Sirah Demand 4469 54903
Sauvignon Blanc Demand 6704 23530 Max
Cash Constraints
Year 1 Year 2
Spent $10,000 $72,682
<= <=
Available $10,000 $72,682
Profit $72,682 $544,981 An inventory holding cost of $0.10 will not change the initial
optimal business plan because we assumed that all wine produce
will be sold in the same year (production = demand). The holding
Total Profit $617,663 cost will have an effect to profit when sales in a given year are les
than the number of wine produced that year.
Year 1 Year 2
$8.00 $8.25
$7.00 $7.00
r Bottle each year
$0.10
Year 1 Year 2
$894 $9,151
$838 $2,353
traints on Petit Sirah
Year 1 Year 2
4469 31373
<= <=
4469 54903
<= <=
7821 54903
0 will not change the initial
e assumed that all wine produced
duction = demand). The holding
when sales in a given year are less
ed that year.
Funds available $10,000
Costs of Grapes per Bottle
Year 1 Year 2
Petite Sirah $0.80 $0.75
Sauvignon Blanc $0.70 $0.85
Union Effect 50%
Cost of Grapes after Union Effect
Year 1 Year 2
Petite Sirah $1.20 $1.13
Sauvignon Blanc $1.05 $1.28
Demand created (bottles) per dollar of advertising
Year 1 Year 2
Petite Sirah 5 6
Sauvignon Blanc 8 10
Percentage of constraints on Petite Sirah sold each year
Min 40%
Max 70%
Production, Sales plan
Year 1 Year 2
Petit Sirah Produced 3162 25784
Sauvignon Blanc Produced 4743 11050
Petit Sirah Available 3162 25784
Sauvignon Blanc Available 4743 11050
>= >=
Petit Sirah Sold 3162 25784
Sauvignon Blanc Sold 4743 11050
<= <=
Petit Sirah Demand 3162 25784
Sauvignon Blanc Demand 4743 11050
Cash Constraints
Year 1 Year 2
Spent $10,000 $48,498
<= <=
Available $10,000 $48,498
Profit $48,498 $241,569
Total Profit $290,067
Selling Price per Bottle
Year 1 Year 2
Petite Sirah $8.00 $8.25
Sauvignon Blanc $7.00 $7.00
Dollars on advertising
Year 1 Year 2
Petit Sirah $632 $4,297
Sauvignon Blanc $593 $1,105
Percentage constraints on Petit Sirah
Year 1 Year 2
Min 3162 14734
<= <=
Actual 3162 25784
<= <=
Max 5534 25784
Oneway analysis for Solver model in 4 worksheet
Union Effect (cell $B$8) values along side, output cell(s) along top
Profit
1
50% $290,067 If the union drives up the cost of grapes, George will be able to
60% $255,590 make less profit because of the higher variable cost of producing a
70% $226,576 bottle of wine. A 50% surchage in grape prices will decrease
profits by more than $300,000 while a 100% price increase will
80% $201,943 decrease profits by more than $500,000 e.g. a higher price
90% $180,865 increase results in a bigger decrease in profits for George.
100% $162,698
350000
300000
250000
200000
150000
100000
50000
0
50%
Sensitivity of Profit to Union Effect
Data for chart
When you select an output from the
Profit
dropdown list in cell $K$4, the chart
290067.3 will adapt to that output.
255590
226575.6
201943.1
180864.8
162698.5
Sensitivity of Profit to Union Effect
350000
300000
250000
200000
150000
100000
50000
0
50% 60% 70% 80% 90% 100%
Union Effect ($B$8)
Cash Constraints
Year 1 Year 2
Spent $10,000 $72,682
<= <=
Available $10,000 $72,682
Profit $72,682 $544,981
Interest Rates: 8.00% Interest Rate NPV
$534,531
PV of profits $67,298 $467,233 6%
NPV $534,531 8%
10%
