This assignment requires you to follow along with the videos to create the models needed to

answer the questions. Some questions will require you to change some of the values in the
models. The questions are short answer. For numerical answers, you may round to two
decimals places.

Modeling Assignment 4

Question 1. At what order quantity is the maximum profit expected to occur with the given
probabilities for demand?

Answer: 2000

Question 2. For a demand of 2000, what order quantity will result in a breakeven profit? What
will happen to the profit if more than this quantity is ordered? Hint: Use goal seek.

Answer: 3404
If more than this quantity is ordered for the same demand (2000), then the loss will start
incurring.

Question 3. For what order quantity does the maximum profit occur when the probabilities for
the possible demand values are all equal?

Answer: 2000
For 2000 orders the profit is around $8833.33 which is the highest among all order quantities

Modeling Assignment 5

Question 1. As the unit cost of production increases, does profit become more sensitive or less
sensitive to changes in unit cost?

Answer: Less sensitive. Profit reduces with less sensitivity (Rate of decrement decreses) when
the unit cost of production increases.

Question 2. Calculate the mean absolute percentage errors for power and exponential curves.
Which of the three models best fits the data: linear, power, or exponential?

Answer:

Here is the Absolute percentage error calculation:

 Linear Linear   Exp Diff   Power Diff
5173.06 0.1495696   5118.81 0.137513   5081.35 0.12919
10492.53 0.0186924   10692.18 0.038076   11015.10 0.069428
5527.69 0.1281009   5376.45 0.097234   5303.99 0.082447
8364.74 0.0273553   7963.56 0.074005   7778.55 0.095518
10847.16 0.132227   11230.33 0.101573   11751.22 0.059903
5173.06 0.0051801   5118.81 0.015614   5081.35 0.022817
9074.01 0.0429893   8785.37 0.009813   8674.93 0.002882
8010.11 0.1779578   7581.95 0.114992   7382.32 0.085636
3399.91 0.2444651   4004.39 0.110136   4155.92 0.076462
3754.54 0.1466958   4205.94 0.044105   4319.26 0.018351
5882.33 0.0141941   5647.05 0.026371   5541.84 0.04451
7300.85 0.0736545   6872.70 0.010692   6676.78 0.01812
MAPE 9.68%     6.50%     5.88%

Looking at this Power curve best matches the data as the error is least

Question 3. What is the best price and maximum profit predicted by the power model assuming
the unit cost of product is $250? Hint: On sheet 2, you will need to update the “parameters for
the best fitting trendline” and the formula used to calculate demand.

Answer:
Maximum profit 1060282.67$
Best price 420$

Modeling Assignment 6

Question 1. Which has a greater present value: the gross margin for year 1 or the gross margin
for year 8 (the peak year for gross margin)?

Answer:

Calculating NPV for each Revenue margin, we get the following:

End of year Gross margin NPV 

1 1.50 $1.40
2 1.59 $1.38
3 1.69 $1.36
 4 1.79 $1.34
5 1.89 $1.32
6 2.01 $1.30
7 2.13 $1.28
8 2.26 $1.26

The gross margin for Year 1 (1.4M) is greater than gross margin for Year 8 (1.26M)

Question 2. What is the present value of the gross margin at year 16?

Answer:

= 1.5 \ (1+7%)^16 = 0.47 M $

Question 3. What rate of increase is needed from year 1 through year 8 to have a year 8 gross
margin with a present value that is equal to the present value of the year 1 gross margin? Hint:
Use goal seek.

Answer: 7.6% Rate of increase