Business Problems based on DSS

1. Your business has a modest profit of 25,000. You've set yourself a new profit Goal of 35,000. At
the moment, you're selling 1000 items at 25 each. Assume that you'll still sell 1000 items. The
question is, to hit your new profit of 35,000, by how much do you have to raise your prices?
2. You've had a meeting with your staff, and it has been decide that a price change from 25 to 35 is
not a good idea. A better idea is to sell more items. You still want a profit of 35 000. Use Goal
Seek to find out how many items you'll have to sell to meet your new profit figure.
3. You have a company producing units of Product A. Your fixed costs for a year are €100,000. The
cost of making one unit is €3.40. You can sell a unit for €5.00. Assume you can sell as many units
as you produce. If you make 100,000 units per year how much profit will you make? Create a
worksheet to answer this question. Have the total cost and the total sales (and the difference –
the profit) included.
*Use Goal Seek to determine how many units you need to produce in order to break
even (i.e. to have zero profit).

*Use Goal Seek to determine what the lowest selling price is for you to break even if you
sell 100,000 units per year.

4. I am running a conference. My fixed costs are $15,000, and I must pay the college union $300
for food and lodging costs per conference participant. Each of 10 speakers must be paid $700. I
am charging all participants who aren’t speaking $900 for the conference, which includes their
food and lodging costs. How many paid registrants need to attend for me to break even?

5. Three electricians are wiring my new home. Electrician 1 by himself will need 11 days to do the
job. Electrician 2 by himself will need 5 days to do the job. Electrician 3 by herself will need 9
days to do the job. If all three electricians work on the job, how long will the job take to
complete?

6. ABC furniture house manufacture chairs, tables and benches. The last few quarters have been
the company build-up inventory in chairs and realize a shortage of supply in tables and benches in light
of market demand. This has adversely affected not just the company’s profitability, but also its market
reputation.

It is now time to plan production for the next quarter and management wants to figure out the optimal
mix of product it should manufacture in the coming quarter to maximize is profitability. Time around,
the management has also roped in a marketing company to get a demand estimate for its product in the
coming quarter. Here are some facts
a. The marketing team has suggested that ABC manufacture at least 500 chairs, 600 tables and
750 benches and no more than 650 chairs, 700 tables and 850 benches.

b. Each chair takes 10 hours to make, each table takes 15 hours and each bench take 18 hours to
manufacture. ABC production team has given a budget of 30000 labor hours for the quarter.

c. The cost of manufacturing for each chair is $60, each table is $75 and each bench is $85.

d. The selling price of each chair is $120, each table is $130 and each bench is $150.

Each chair uses 4 units of wood, each table uses 10 units of wood and each bench uses 8 unit of wood-
you have a total of only 15000 units of wood this quarter.

Q7. A computer manufacturing plant produces mice, keyboards, and video game
joysticks. The per-unit profit, per-unit labor usage, monthly demand, and per-unit
machine-time usage are given in the following table:

Mice Keyboards
Joysticks
Profit/unit $8 $11 $9
Labor usage/unit .2 hour .3 hour .24
hour
Machine time/unit .04 hour .055 hour .04
hour
Monthly demand 15,000 25,000
11,000

Each month, a total of 13,000 labor hours and 3000 hours of machine time are
available. How can the manufacturer maximize its monthly profit contribution from the
plant?

Q8. Jason the jeweler makes diamond bracelets, necklaces, and earrings. He wants to
work at most 160 hours per month. He has 800 ounces of diamonds. The profit, labor
time, and ounces of diamonds required to produce each product are given below. If
demand for each product is unlimited, how can Jason maximize his profit?

Product Unit Profit Labor Hours

Ounces of
Per Unit Per Unit Diamonds
Per Unit
Bracelet $300 .35 1.2
Necklace $200 .15 .75
Earrings $100 .05 .5
Q9. At a chip manufacturing plant, four technicians (A, B, C, and D) produce three
products (products 1, 2, and 3). The chip manufacturer can sell 80 units of product 1
this month, 50 units of product 2, and at most 50 units of product 3. Technician A can
make only products 1 and 3. Technician B can make only products 1 and 2. Technician
C can make only product 3. Technician D can make only product 2. For each unit
produced, the products contribute the following profit: product 1, $6; product 2, $7;
product 3, $10. The
time (in hours) each technician needs to manufacture a product is as follows:
---------------------------------------------------------------------------------------------------------------------------
------
Product Technician A Technician B Technician C
Technician D
1 2 2.5 Cannot do Cannot
do
2 Cannot do 3 Cannot do 3.5
3 3 Cannot do 4
Cannot do
---------------------------------------------------------------------------------------------------------------------------
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Each technician can work up to 120 hours per month. How can the chip manufacturer
maximize its monthly profit?

Q10. Currently we sell 40,000 units of a product for $45. The unit variable cost of
producing the product is $5. We are thinking of cutting the product price by 30 percent.
We are sure this will increase sales by an amount between 10 percent and 50 percent.
Perform a sensitivity analysis to show how profit will change as a function of the
percentage increase in sales. Ignore fixed costs.

11. Let’s assume that at the end of each of the next 40 years, we will put the same
amount in our retirement fund and earn the same interest rate each year. Show how the
amount of money we will have at retirement changes as we vary our annual
contribution between $5,000 and $25,000 and the rate of interest varies between 3
percent and 15 percent.

Q12. For our mortgage example, suppose you know the annual interest rate will be 5.5
percent. Create a table that shows for amounts borrowed between $300,000 and
$600,000 (in $50,000 increments) the difference in payments between a 15-year, 20-
year, and 30-year mortgage.

Q13. Currently we sell 40,000 units of a product for $45. The unit variable cost of
producing the product is $5. We are thinking of cutting the product price by 30 percent.
We are sure this will increase sales by an amount between 10 percent and 50 percent.
Perform a sensitivity analysis to show how profit will change as a function of the
percentage increase in sales. Ignore fixed costs.

Q14. Let’s assume that at the end of each of the next 40 years, we will put the same
amount in our retirement fund and earn the same interest rate each year. Show how the
amount of money we will have at retirement changes as we vary our annual
contribution between $5,000 and $25,000 and the rate of interest varies between 3
percent and 15 percent.