AD BUDGET DECISION PROBLEM

Q1 Q2 Q3
Unit Price $40.00
Unit cost $25.00
Overhead(%) 15%
Sales force Cost $8,000.00 $8,000.00 $9,000.00
Seasonal Factor 90% 110% 80%
Base 35
DECISION

Ad Budget Allocation $10,000.00 $10,000.00 $10,000.00

SUMMARY OF KEY OUTCOMES

Total Profit 69662

CALCULATIONS $

Q1 Q2 Q3 Q4
Units Sold 3592 4390 3192 4789
Total Revenue 143662 175587 127700 191549
Overhead ($) 21549 26338 19155 28732
COGS 89789 109742 79812 119718
Salesforce Cost 8000 8000 9000 9000
Add Expenses 10,000 10,000 10,000 10,000
Total Cost 129338 154080 117967 167451
Profit 14324 21507 9732 24099

Two w
Q1 Ad Expenses
Q2 Ad Expenses $69,662 $5,000.00 $6,000.00 $7,000.00
$5,000.00 $64,180 $64,718 $65,173
$6,000.00 $65,060 $65,598 $66,053
$7,000.00 $65,838 $66,376 $66,831
$8,000.00 $66,529 $67,067 $67,522
$9,000.00 $67,145 $67,683 $68,138
$10,000.00 $67,695 $68,233 $68,688
 $11,000.00 $68,186 $68,725 $69,179
$12,000.00 $68,625 $69,164 $69,618
$13,000.00 $69,017 $69,555 $70,010
$14,000.00 $69,366 $69,904 $70,359
$15,000.00 $69,676 $70,214 $70,669

Two w
Q1 Ad Expenses
Q2 Ad Expenses $69,662 $5,000.00 $6,000.00 $7,000.00
$5,000.00 $64,180 $65,060 $65,838
$6,000.00 $64,718 $65,598 $66,376
$7,000.00 $65,173 $66,053 $66,831
$8,000.00 $65,557 $66,437 $67,215
$9,000.00 $65,879 $66,759 $67,537
$10,000.00 $66,147 $67,027 $67,805
$11,000.00 $66,367 $67,247 $68,025
$12,000.00 $66,544 $67,424 $68,203
$13,000.00 $66,683 $67,563 $68,341
$14,000.00 $66,787 $67,667 $68,445
$15,000.00 $66,858 $67,738 $68,517
 Change In Outcome wrt change in parameter
Q4 Parameter(Unit Cost)
Base Case $25.00
New Case $26.00
% Change 4.00%
$9,000.00
120% Change In Outcome wrt change in parameter
Parameter(Unit Price))
Base Case $40.00

$10,000.00 (Base Case) New Case $80.00

% Change 100.00%

Change In Outcome wrt change in parameter Q1

Total Parameter(Ad Expense))
Base Case $10,000.00
New Case $11,000.00

% Change 10.00%

Change In Outcome wrt change in parameter Q2

x Parameter(Ad Expense))
Base Case $10,000.00
69662 New Case $11,000.00
% Change 10.00%

Two way Data Table

$8,000.00 $9,000.00 $10,000.00 $11,000.00 $12,000.00

$65,557 $65,879 $66,147 $66,367 $66,544
$66,437 $66,759 $67,027 $67,247 $67,424
$67,215 $67,537 $67,805 $68,025 $68,203
$67,906 $68,228 $68,496 $68,716 $68,894
$68,522 $68,844 $69,112 $69,332 $69,510
$69,072 $69,394 $69,662 $69,882 $70,060
$69,563 $69,885 $70,153 $70,374 $70,551
$70,002 $70,324 $70,592 $70,813 $70,990
$70,394 $70,716 $70,984 $71,204 $71,382
$70,743 $71,065 $71,333 $71,553 $71,731
$71,053 $71,375 $71,643 $71,863 $72,040

Two way Data Table

$8,000.00 $9,000.00 $10,000.00 $11,000.00 $12,000.00

$66,529 $67,145 $67,695 $68,186 $68,625
$67,067 $67,683 $68,233 $68,725 $69,164
$67,522 $68,138 $68,688 $69,179 $69,618
$67,906 $68,522 $69,072 $69,563 $70,002
$68,228 $68,844 $69,394 $69,885 $70,324
$68,496 $69,112 $69,662 $70,153 $70,592
$68,716 $69,332 $69,882 $70,374 $70,813
$68,894 $69,510 $70,060 $70,551 $70,990
$69,033 $69,648 $70,198 $70,690 $71,129
$69,136 $69,752 $70,302 $70,793 $71,232
$69,208 $69,824 $70,374 $70,865 $71,304
wrt change in parameter Change In Outcome wrt change in param
Outcome (Profit) Parameter(Ad Expense))
$69,662.00 Base Case $10,000.00
$537,000.00 New Case $11,000.00
670.87% % Change 10.00%

wrt change in parameter Change In Outcome wrt change in param

Outcome (Profit) Parameter(Ad Expense))
$69,662.00 Base Case $10,000.00

$596,423.00 New Case $11,000.00

756.17% % Change 10.00%

hange in parameter Q1
Outcome (Profit)
$69,662.00
$70,882.00

1.75%

hange in parameter Q2
Outcome (Profit)
$69,662.00
$71,153.00
2.14%

$13,000.00 $14,000.00 $15,000.00

$66,683 $66,787 $66,858
$67,563 $67,667 $67,738
$68,341 $68,445 $68,517
$69,033 $69,136 $69,208
$69,648 $69,752 $69,824
$70,198 $70,302 $70,374
 $70,690 $70,793 $70,865
$71,129 $71,232 $71,304
$71,520 $71,624 $71,696
$71,869 $71,973 $72,045
$72,179 $72,283 $72,354

$13,000.00 $14,000.00 $15,000.00

$69,017 $69,366 $69,676
$69,555 $69,904 $70,214
$70,010 $70,359 $70,669
$70,394 $70,743 $71,053
$70,716 $71,065 $71,375
$70,984 $71,333 $71,643
$71,204 $71,553 $71,863
$71,382 $71,731 $72,040
$71,520 $71,869 $72,179
$71,624 $71,973 $72,283
$71,696 $72,045 $72,354
change in parameter Q1 One Way Data Table
Outcome (Profit)
$70,000.00
$69,810.00 Unit Cost $20.00
-0.27% $21.00
$22.00
change in parameter Q2 $23.00
Outcome (Profit) $24.00
$70,000.00 $25.00

$69,990.00 $26.00

-0.01%
$27.00
$28.00

$29.00
$30.00

Break Even At What Unit Cost $29.36

Break Even At What Unit Price $34.87

a Table
Profit
$69,662
$149,474
$133,512
$117,549
$101,587
$85,625
$69,662 Base Case

$53,700

$37,737
$21,775

$5,812
-$10,150
x+y 40 $10.00
$6.00
$7.00
C1 2 $20.00
C2 38 $228.00 In order to see what quantity of C
should we be buying to have an
average price of $7, we will set (o
$248.00 price) cell to value $280 by changin
$280.00 the quantity cell
 In order to see what quantity of C1
should we be buying to have an
average price of $7, we will set (old
price) cell to value $280 by changing
the quantity cell
Scenario Summary
Current Values: Optimistic Pessimistic Base
Changing Cells:
$B$3 $40.00 $50.00 $35.00 $40.00
$B$4 $25.00 $20.00 $30.00 $25.00
$B$5 15% 12% 18% 15%
Result Cells:
$F$22 69662 309099 -94751 69662
Notes: Current Values column represents values of changing cells at
time Scenario Summary Report was created. Changing cells for each
scenario are highlighted in grey.
 1. You are buying a copier. Would you rather pay $11,000 today or $3,000 a year for fi
year.

Scheme 1 Pay Now $11,000.00

Amount deposited each year $3,000.00

Interest Rate 12.00%
Scheme 2
No. of years 5.00
Amount in 5 years $10,814.33

Amount deposited each year $3,000.00

Interest Rate 12.00%
Scheme 3 No. of years 5.00
Amount to pay after 5 years $500.00
Amount to be paid now $11,098.04

If at the end of each of the next 40 years, I invest $2,000 a year toward my retireme
investments, how much will I have when I retire?

Amount deposited each year $2,000.00

Interest Rate 8.00%
No. of years 40.00
Amount to pay after 5 years $0.00
Amount to be paid now $518,113.04

Amount deposited each year $2,000.00

Interest Rate 8.00%
Alternative No. of years 40.00
Amount in bank right now $30,000.00
Amount to be paid now $1,169,848.68
 I am borrowing $10,000 for 10 months with an annual interest rate of 8%. Using an E
payments.

Amount to be deposited
$1,037.03
every month
Interest Rate 8.00%
No. of months 10.00
Amount to be paid $10,000.00

You want to replace a machine in 10 years, and you estimate the cost will be $80,000.
investments, using an Excel function, compute how much money should you put aside a
of the machine.

Amount to be deposited
-$5,522.36
every year
Interest Rate 8.00%
No. of years 10.00
Future Cost of Machine $80,000.00

Investment 1 requires a cash outflow of $10,000 today and $14,000 two years from now
will yield $24,000. Investment 2 requires a cash outflow of $6,000 today and $1,000 tw
this investment will yield $8,000. Assuming an interest rate of 0.2, use an Excel fun
investment.

0 1 2
Investment 1 -$10,000.00 $24,000.00 -$14,000.00
Investment 2 -$6,000.00 $8,000.00 -$1,000.00
Rate 20.00%
NPV $277.78 -$27.78
Consider the following set of cash flows over a four-year period. Using the Excel func
flows, if r=0.15 and cash flows occur at the end of the

1 2 3
Cash Flows -$600.00 $550.00 -$680.00
Rate 15.00%
NPV $18.78
oday or $3,000 a year for five years?Assume 12% interest rate per
year.

QUESTION 1
In comparision to $11,000 (as of today) & paying $3,000 for 5
years , present value $10,081 < $11,000

a year toward my retirement and earn 8 percent a year on my

h will I have when I retire?

QUESTION 2
erest rate of 8%. Using an Excel function determinemy monthly
yments.

QUESTION 3

te the cost will be $80,000. If you can earn 8% annually on your

oney should you put aside at the end of each year to cover the cost
machine.

QUESTION 4

$14,000 two years from now. One year from now, this investment
6,000 today and $1,000 two years from now. One year from now,
ate of 0.2, use an Excel function to determine which is a better
estment. QUESTION 5.
Better Investment
eriod. Using the Excel function, determine the NPV of these cash
ows occur at the end of the year.

QUESTION 6
4
$1,000.00

QUESTION 7
QUESTION 1

QUESTION 2
 QUESTION 3

Use Of PMT Function

QUESTION 4

QUESTION 5.
Better Investment

Use Of NPV Function

 Use Of NPV Function

QUESTION 6

QUESTION 7
 AD BUDGET DECISION PROBLEM

Q1
Unit Price $40.00
Unit cost $25.00
Overhead(%) 15%
Sales force Cost $8,000.00
Seasonal Factor 90%
Base 35
DECISION
Ad Budget Allocation $0.00
SUMMARY OF KEY OUTCOMES

Total Profit $62,866.06

CALCULATIONS $

Q1 Q2
Units Sold $1,725.33 $4,389.68
Total Revenue $69,013.04 $175,587.02
Overhead ($) $10,351.96 $26,338.05
COGS $43,133.15 $109,741.88
Salesforce Cost $8,000.00 $8,000.00
Add Expenses $0.00 $10,000.00
Total Cost $61,485.11 $154,079.94
Profit $7,527.93 $21,507.08

Krafty Furniture Problem

Hours Per Unit

Chairs Desks
Fabrication 4 6
Assembly 3 5
Shipping 3 2
Demand Potential 360 300
Profit $15.00 $24.00

DECISION
 Chairs Desks
Units 0 275
x1 x2
SUMMARY OF KEY OUTCOMES
Total Profit $8,400.00

CALCULATIONS $
Fabrications Hours Used 1850
Assembly Hours Used 2075
Shipping Hours Used 950
Total Profit $8,400.00
SION PROBLEM

Q2 Q3 Q4

$8,000.00 $9,000.00 $9,000.00

Practice for Solver
110% 80% 120%

ION
$10,000.00 $10,000.00 $10,000.00
EY OUTCOMES

TIONS $

Q3 Q4 Total
$3,192.49 $4,788.74
$127,699.65 $191,549.47
$19,154.95 $28,732.42
$79,812.28 $119,718.42
$9,000.00 $9,000.00
$10,000.00 $10,000.00
$117,967.23 $167,450.84
$9,732.42 $24,098.63 $62,866.06

ure Problem

Hours Available
Tables
2 1850
7 2400
4 1500
100
$18.00

ION
 Tables
100
x3
EY OUTCOMES

TIONS $
Solver Add-In
We are maximising/minimising the profit wrt Q1 ad budget
allocation keeping other things constant. Data - Solver

Solver Add-In

We are maximising/minimising the profit wrt Q1-4 ad budget

allocation keeping other things constant. Data - Solver
 You have $100 in bank today. How much would the amoun

Amount today $100.00

Interest Rate 10.00%
No. of years 2.00
$121.00
Amount in 2 years
$121.00

You want to have $100 in bank at the end of 2 years. How much sho

Amount in 2 years $100.00

Interest Rate 10.00%
No. of years 2.00
Amount Today -$82.64

A savings scheme allows you to deposit $100 each year (at the end/in the beginning

Amount deposited each year $100.00

Interest Rate 10.00%
No. of years 2.00
$231.00
Amount in 2 years
$210.00

You have $100 in your account. A savings scheme allows you to deposit $100 each ye
have at the end of 2 yea

Amount today $100.00

Amount deposited each year $100.00
Interest Rate 10.00%
No. of years 2.00
$331.00
Amount in 2 years
$352.00
 You want to have $231 in your account after 2 years. How much will you d

Amount today $0.00

Amount deposited each year -$100.00
Interest Rate 10.00%
No. of years 2.00
Amount in 2 years $231.00

You want to have $210 in your account after 2 years. How much will yo

Amount today $0.00

Amount deposited each year -$100.00
Interest Rate 10.00%
No. of years 2.00
Amount in 2 years $210.00
 bank today. How much would the amount be in 2 years at 10% p.a. ?

Using Future Value Formula

Using Basic Formula

bank at the end of 2 years. How much should you deposit today at 10% p.a. ?

Using Present Value Formula

$100 each year (at the end/in the beginning), at 10% p.a.. How much will you have at the end of 2 years?

In the beginning of the year

Using Future Value Formula
At the end of the year

cheme allows you to deposit $100 each year (at the end/in the beginning), at 10% p.a.. How much will you
have at the end of 2 years?

At the end of the year

Using Future Value Formula
In the beginning of the year
count after 2 years. How much will you deposit each year (in the beginning) for 2 years at 10%?

At the end of the year

r account after 2 years. How much will you deposit each year (at the end) for 2 years at 10%?

At the end of the year

end of 2 years?

If nothing is mentioned you will

assume that money is deposited at
the end of the year

ow much will you

at 10%?

0%?
 AD BUDGET DECISION PROBLEM
Q1 Q2
Unit Price $40.00
Unit cost $25.00
Overhead(%) 15%
Sales force Cost $8,000.00 $8,000.00
Seasonal Factor 90% 110%
Base 35
DECISION
Ad Budget Allocation $17,092.96 $27,015.53
SUMMARY OF KEY OUTCOMES
Total Profit $79,705.62
CALCULATIONS $
Q1 Q2 Q3
Units Sold $4,465.11 $6,670.12 $3,528.01
Total Revenue $178,604.57 $266,804.86 $141,120.32
Overhead ($) $26,790.68 $40,020.73 $21,168.05
COGS $111,627.85 $166,753.04 $88,200.20
Salesforce Cost $8,000.00 $8,000.00 $9,000.00
Add Expenses $17,092.96 $27,015.53 $12,876.07
Total Cost $163,511.50 $241,789.30 $131,244.32
Profit $15,093.06 $25,015.56 $9,876.00
OBLEM
Q3 Q4

$9,000.00 $9,000.00
80% 120%

$12,876.07 $32,720.65 $89,705.22

COMES

Q4 Total
$7,937.96
$317,518.46
$47,627.77
$198,449.04
$9,000.00
$32,720.65
$287,797.46
$29,721.00 $79,705.62