Exercise-1: Model #1 Conceptualization

input factors:
3# Formalization price =4
Input Variables var cost =1.5
demand=30000
fix cost=25000
inter var:
revenue
total cost
total var cost
Results - mathematical model cal var:
profit

# Modeling

price (DV)

demand (OV)

var cost (EV)

fixed cost (EV)

 #2 Verbalization
1. revenue= price*QS
price*demand (None Linear)

2. Total Var cost=var cost*UM

var cost*demand (None Linear)

3. Profit= Revenue-total cost (Linear)

4. Total cost= fix cost+total var cost (linear)

revenue (OV)

total var cost (OV) profit (OV)

total cost (OV)

Data Table - One variable 1. Revenue = Price * Demand
2. Total Variable Cost= Cost * Demand
Input Variables 3. Total Cost= Total Var Cost + Fixed Cost
Price per unit $ 4.00 4. Profit = Revenue - Total Cost
Cost per unit $ 1.50
Fixed Cost $ 25,000.00
Demand 30000 Revenue
Results - mathematical model price $ 120,000.00
Revenue $ 120,000.00 $ 2.00 $ 60,000.00
Total Variable Cost $ 45,000.00 $ 2.25 $ 67,500.00
Total Cost $ 70,000.00 $ 2.50 $ 75,000.00
Profit $ 50,000.00 $ 2.75 $ 82,500.00
$ 3.00 $ 90,000.00
$ 3.25 $ 97,500.00
$ 3.50 $ 105,000.00
$ 3.75 $ 112,500.00
$ 4.00 $ 120,000.00
$ 4.25 $ 127,500.00
$ 4.50 $ 135,000.00
$ 4.75 $ 142,500.00
$ 5.00 $ 150,000.00
Demand
Fixed Cost
t

When price increases, revenue increases ==> + relationship

Data Table - One variable 1. Revenue = Price * Demand
2. Total Variable Cost= Cost * Demand
Input Variables 3. Total Cost= Total Var Cost + Fixed Cost
Price per unit $ 4.00 4. Profit = Revenue - Total Cost
Cost per unit $ 1.50
Fixed Cost $ 25,000.00
Demand 30000 Total Variable Cost When price increases, the to
Results - mathematical model $ 45,000.00
Revenue $ 120,000.00 1 $ 2.00 $ 45,000.00
Total Variable Cost $ 45,000.00 Production Cost 2 $ 2.25 $ 45,000.00
Total Cost $ 70,000.00 3 $ 2.50 $ 45,000.00
Profit $ 50,000.00 4 $ 2.75 $ 45,000.00
5 $ 3.00 $ 45,000.00
6 $ 3.25 $ 45,000.00
Price 7 $ 3.50 $ 45,000.00
8 $ 3.75 $ 45,000.00
9 $ 4.00 $ 45,000.00
10 $ 4.25 $ 45,000.00
11 $ 4.50 $ 45,000.00
12 $ 4.75 $ 45,000.00
13 $ 5.00 $ 45,000.00
When price increases, the total var cost remains the same, no relationship
Data Table - One variable 1. Revenue = Price * Demand
2. Total Variable Cost= Cost * Demand
Input Variables 3. Total Cost= Total Var Cost + Fixed Cost
Price per unit $ 4.00 4. Profit = Revenue - Total Cost
Cost per unit $ 1.50
Fixed Cost $ 25,000.00
Demand 30000 Profit When price increases, profi
Results - mathematical model $ 50,000.00
Revenue $ 120,000.00 1 $ 2.00 $ (10,000.00)
Total Variable Cost $ 45,000.00 2 $ 2.25 $ (2,500.00)
Total Cost $ 70,000.00 3 $ 2.50 $ 5,000.00
Profit $ 50,000.00 4 $ 2.75 $ 12,500.00
5 $ 3.00 $ 20,000.00
6 $ 3.25 $ 27,500.00
Price 7 $ 3.50 $ 35,000.00
8 $ 3.75 $ 42,500.00
9 $ 4.00 $ 50,000.00
10 $ 4.25 $ 57,500.00
11 $ 4.50 $ 65,000.00
12 $ 4.75 $ 72,500.00
13 $ 5.00 $ 80,000.00
When price increases, profit increases ==> + relationship
Data Table - Two variables 1. Revenue = Price * Demand
2. Total Variable Cost= Cost * Demand
Input Variables 3. Total Cost= Total Var Cost + Fixed Cost
Price per unit $ 4.00 4. Profit = Revenue - Total Cost
Cost per unit $ 1.50
Fixed Cost $ 25,000.00
Demand 30000 Profit Co
Results - mathematical model $ 50,000.00 $ 1.20 $ 1.30
Revenue $ 120,000.00 $ 2.00 $ (1,000.00) $ (4,000.00)
Total Variable Cost $ 45,000.00 $ 2.25 $ 6,500.00 $ 3,500.00
Total Cost $ 70,000.00 $ 2.50 $ 14,000.00 $ 11,000.00
Profit $ 50,000.00 $ 2.75 $ 21,500.00 $ 18,500.00
$ 3.00 $ 29,000.00 $ 26,000.00
$ 3.25 $ 36,500.00 $ 33,500.00
Price $ 3.50 $ 44,000.00 $ 41,000.00
$ 3.75 $ 51,500.00 $ 48,500.00
$ 4.00 $ 59,000.00 $ 56,000.00
$ 4.25 $ 66,500.00 $ 63,500.00
$ 4.50 $ 74,000.00 $ 71,000.00
$ 4.75 $ 81,500.00 $ 78,500.00
$ 5.00 $ 89,000.00 $ 86,000.00

If the minimum profit Ahmed expects to make from his investme

price and cost.
any number above 50000 is an acceptable answer

Determine how $10,000 increases in fixed cost will affect the pro
it will go down by 10000
 possible ranges of prices 3.75 to 5, we will have profit >= 50,000
possible ranges of cost 1.20 to 1.80 we will have profit >= 50,000

Cost per unit

$ 1.40 $ 1.50 $ 1.60 $ 1.70 $ 1.80
$ (7,000.00) $ (10,000.00) $ (13,000.00) $ (16,000.00) $ (19,000.00)
$ 500.00 $ (2,500.00) $ (5,500.00) $ (8,500.00) $ (11,500.00)
$ 8,000.00 $ 5,000.00 $ 2,000.00 $ (1,000.00) $ (4,000.00)
$ 15,500.00 $ 12,500.00 $ 9,500.00 $ 6,500.00 $ 3,500.00
$ 23,000.00 $ 20,000.00 $ 17,000.00 $ 14,000.00 $ 11,000.00
$ 30,500.00 $ 27,500.00 $ 24,500.00 $ 21,500.00 $ 18,500.00
$ 38,000.00 $ 35,000.00 $ 32,000.00 $ 29,000.00 $ 26,000.00
$ 45,500.00 $ 42,500.00 $ 39,500.00 $ 36,500.00 $ 33,500.00
$ 53,000.00 $ 50,000.00 $ 47,000.00 $ 44,000.00 $ 41,000.00
$ 60,500.00 $ 57,500.00 $ 54,500.00 $ 51,500.00 $ 48,500.00
$ 68,000.00 $ 65,000.00 $ 62,000.00 $ 59,000.00 $ 56,000.00
$ 75,500.00 $ 72,500.00 $ 69,500.00 $ 66,500.00 $ 63,500.00
$ 83,000.00 $ 80,000.00 $ 77,000.00 $ 74,000.00 $ 71,000.00

s to make from his investment is $50,000, Then what are the possible ranges of
ptable answer

fixed cost will affect the profit.

 1. Revenue = Price * Demand
2. Total Variable Cost= Cost * Demand
Input Variables 3. Total Cost= Total Var Cost + Fixed Cost
Price per unit $ 4.00 4. Profit = Revenue - Total Cost
Cost per unit $ 1.50
Fixed Cost $ 25,000.00 +10000
Demand 30000
Results - mathematical model
Revenue $ 120,000.00
Total Variable Cost $ 45,000.00
Total Cost $ 70,000.00
Profit $ 50,000.00
the profit is decreased by the same amount
Goal Seek 1. Revenue = Price * Demand
2. Total Variable Cost= Cost * Demand
Input Variables 3. Total Cost= Total Var Cost + Fixed Cost
Price per unit $ 4.00 4. Profit = Revenue - Total Cost
Cost per unit $ 1.50
Fixed Cost $ 25,000.00
Demand 38000 ?
Results - mathematical model
Revenue $ 152,000.00
Total Variable Cost $ 57,000.00
Total Cost $ 82,000.00
Profit $ 70,000.00 =70000
The store needs to sell 38000 unit to get 70,000 profit
Goal Seek 1. Revenue = Price * Demand
2. Total Variable Cost= Cost * Demand
Input Variables 3. Total Cost= Total Var Cost + Fixed Cost
Price per unit $ 4.67 ? 4. Profit = Revenue - Total Cost
Cost per unit $ 1.50
Fixed Cost $ 25,000.00
Demand 30000
Results - mathematical model
Revenue $ 140,000.00
Total Variable Cost $ 45,000.00
Total Cost $ 70,000.00
Profit $ 70,000.00 =70000
The store needs to set the price to $4.67 to get 70,000 profit
Solver
Input Variables
Price per unit $ 4.00
Cost per unit $ 1.00 between 1 and 2 Cost>= 1 and Cost <=2
Fixed Cost $ 25,000.00
Demand 30000
Results - mathematical model
Revenue $ 120,000.00
Total Variable Cost $ 30,000.00
Total Cost $ 55,000.00 the cost per unit should be 1 to get min total cost = 55,000
Profit $ 65,000.00
 1. Revenue = Price * Demand
2. Total Variable Cost= Cost * Demand
3. Total Cost= Total Var Cost + Fixed Cost
4. Profit = Revenue - Total Cost

o get min total cost = 55,000

Solver 1. Revenue = Price * Demand
2. Total Variable Cost= Cost * Demand
Input Variables 3. Total Cost= Total Var Cost + Fixed Cost
Price per unit $ 6.00 at most $6 Price <= 6 4. Profit = Revenue - Total Cost
Cost per unit $ 1.50
Fixed Cost $ 25,000.00
Demand 30000
Results - mathematical model
Revenue $ 180,000.00 the price per unit should be 6 to get max revenue = 180,000
Total Variable Cost $ 45,000.00
Total Cost $ 70,000.00
Profit $ 110,000.00
 Demand
t= Cost * Demand
ar Cost + Fixed Cost
Total Cost
Solver 1. Revenue = Price * Demand
2. Total Variable Cost= Cost * Demand
Input Variables 3. Total Cost= Total Var Cost + Fixed Cost
Price per unit $ 5.46 ? 4. Profit = Revenue - Total Cost
Cost per unit $ 1.29 ?
Fixed Cost $ 25,000.00
Demand 30000
Results - mathematical model
Revenue $ 163,835.62
Total Variable Cost $ 38,835.62
Total Cost $ 63,835.62
Profit $ 100,000.00 = 100,000
when price= 5.46 and cost= 1.29 we get profit = 100,000
 Demand
t= Cost * Demand
ar Cost + Fixed Cost
Total Cost
Solver 1. Revenue = Price * Demand
2. Total Variable Cost= Cost * Demand
Input Variables 3. Total Cost= Total Var Cost + Fixed Cost
Price per unit $ 5.00 ? at least $2 and at most $5 Price <= 5 , Price >=2= Revenue - Total Cost
4. Profit
Cost per unit $ 1.20 ? at least $1.2 and at most $1.8 Cost <= 1.8 , Cost >=1.2
Fixed Cost $ 25,000.00
Demand 30000
Results - mathematical model
Revenue $ 150,000.00
Total Variable Cost $ 36,000.00
Total Cost $ 61,000.00
Profit $ 89,000.00 ? MAX
when price= 5 and cost= 1.2 we get max profit
. Revenue = Price * Demand
. Total Variable Cost= Cost * Demand
. Total Cost= Total Var Cost + Fixed Cost
. Profit = Revenue - Total Cost