DataAnalysis Assignment 8.1

Assignment 8.
Problem-1
Develop a simulation model in SPSS for a three-year financial analysis of total profit based on the following data
and information. Sales volume in the first year is 100,000 units and is projected to grow at a rate that is normally
distributed with a mean of 7% per year and a standard deviation of 4%. The selling price is $10 and the price
increase each year is normally distributed with a mean of $0.50 and a standard deviation of $0.05 each year. Per-unit
variable costs are $3, and annual fixed costs are $200,000. Per-unit variable costs are expected to increase by an
amount normally distributed with a mean of 5% per a year and a standard deviation of 2%. Fixed costs are expected
to increase following a normal distribution with a mean of 10% per year and a standard deviation of 3%.
Report the descriptive statistics for profit each year and the cumulative profit. How confident are you that profits
will increase each year? Use the percentiles report to answer this question and provide appropriate
evidence. (NOTE: Sales, prices, and costs are NOT uncertain but rather the growth in each of these is
uncertain. You should get a new growth value each year for each of the four variables for a total of eight
uncertain items.)
Solution
Using SPSS, the below inputs and simulations was developed based on the above given inputs
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Equations used in the simulation process to find the profit and cumulative profit for three years
Custom Model Definition

Target Numeric Expression
salesvolume2 (salesvolume1*(1+(growthRate/100)))
salesvoulme3 (salesvolume2*(1+(growthRate/100)))
sellingprice2 (sellingprice1+priceIncreaseRate)
sellingPrice3 (sellingprice2+priceIncreaseRate)
FixedCosts2 (FixedCosts1*(1+(FixedCostsRate/100)))
FixedCosts3 (FixedCosts2*(1+(FixedCostsRate/100)))
PerUnitCosts2 (PerUnitcosts1*(1+(PerUnitCostsRate/100)))
PerUnitCosts3 (PerUnitCosts2*(1+(PerUnitCostsRate/100)))
profit1 (((salesvolume1*sellingprice1)-(PerUnitcosts1*salesvolume1))-FixedCosts1)
profit2 (((salesvolume2*sellingprice2)-(PerUnitCosts2*salesvolume2))-FixedCosts2)
profit3 (((salesvoulme3*sellingPrice3)-(PerUnitCosts3*salesvoulme3))-FixedCosts3)
cumulativeProfit1 profit1
cumulativeProfit2 (cumulativeProfit1+profit2)
cumulativeProfit3 (cumulativeProfit2+profit3)
After the running the simulation plan, the following table gives the descriptive statistics for the profit and
cumulative profit.
From the above image, we can see the profit for year 2and year 3 is mean of $567077.931885
and $ 640907.240294 respectively.
And Cumulative profit for the year 2 and year 3 are $ 1067077.931885 and $ 1707985.172180
respectively.
Below are the charts that representing the profit for the years.
Problem-2
 TudorTech is a new software company that develops and markets productivity
software for municipal government applications. In developing their income statement, the
following formulas are used:
 Gross profit = Net sales – Cost of sales
 Net operating profit = Gross profit – Administrative expenses – Selling
expenses
 Net income before taxes = Net operating profit – Interest expense
 Net income = Net income before taxes – taxes
Net sales are uniformly distributed between $600,000 and $1,200,000. Cost of
sales is normally distributed with a mean of $540,000 and a standard deviation of
$20,000. Selling expenses has a fixed component that is uniform between $75,000
and $110,000. There is also a variable component that is 7% of net sales.
Administrative expenses are normal with a mean of $50,000 and a standard
deviation of $3,500. Interest expenses are $10,000. The tax rate is 50%. Develop a
simulation model in SPSS and report the descriptive statistics for net income and
compute a 95% confidence interval for average net income.
Solution
Using SPSS simulation modeler, the following inputs, equations were taken to get the net income
descriptive statistics
 All the variables of the simulations
 Equations used in the simulation model
 Input distribution based on the given values
Input Distributions
Parameter Value
AdminExpenses Normal mean 50000.000
stddev 3500.000
CostOfSales Normal mean 540000.000
stddev 20000.000
InterestExpense Fixed Input Value 10000.00
NetSales Uniform min 600000.00
max 1200000.00
SellingExpenses Uniform min 75000.00
max 110000.00
taxRate Fixed Input Value 50.00
VariableComponent Fixed Input Value 7.00
 Below image shows the descriptive statistics of all the targets including the net Income
Net Income with mean of $72011.345.
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Assignment 8.

Custom Model Definition

 Equations used in the simulation model

Net Income with mean of $72011.345.

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