SP 200

Option 1 Option 2Fixed cost 2000 800Variable cost 120 120Additional VC 0 30Total VC 120 150Selling price 200 200Contribution towards fixed cost 80 50

Units sold 40Sales 8000 8000Variable Cost 4800 6000Contribution towards fixed cost 3200 2000Fixed cost 2000 800Operating Profit 1200 1200Degree of Operating Leverage (Contribution/operating profit) 2.666667 1.666667

Option 30

12050

170200

30

Units sold 608000 Sales 120006800 Variable Cost 72001200 Contribution towards fixed cost 4800

0 Fixed cost 20001200 Operating Profit 2800

1 Degree of Operating Leverage (Contribution/operating profit) 1.714286

Units sold12000 12000 Sales

9000 10200 Variable Cost3000 1800 Contribution towards fixed cost

800 0 Fixed cost2200 1800 Operating Profit

1.363636 1 Degree of Operating Leverage (Contribution/operating profit)

204000 4000 40002400 3000 34001600 1000 6002000 800 0-400 200 600

-4 5 1

Smasher Basher Dinker TotalUnits sold 1000 2000 2000 5000Sales 100000 120000 80000 300000Less variable costs 50000 48000 24000 122000Contribution margin 50000 72000 56000 178000Less common fixed costs 103000

Profit 75000

Weighted average contribution margin

Microsoft Excel 14.0 Answer ReportWorksheet: [Emma Problem.xlsx]Sheet3Report Created: 11/25/2014 11:26:38 AMResult: Solver found a solution. All Constraints and optimality conditions are satisfied.Solver Engine

Engine: GRG NonlinearSolution Time: 0.016 Seconds.Iterations: 3 Subproblems: 0

Solver OptionsMax Time Unlimited, Iterations Unlimited, Precision 0.000001 Convergence 0.0001, Population Size 100, Random Seed 0, Derivatives CentralMax Subproblems Unlimited, Max Integer Sols Unlimited, Integer Tolerance 1%, Assume NonNegative

Objective Cell (Max)Cell Name Original Value Final Value

$E$14 Contribution/unit 11450 9417500

Variable CellsCell Name Original Value Final Value Integer

$C$16 Decision variables Nx100 50 3000 Contin$D$16 Decision variables Mx100 60 95500 Contin

ConstraintsCell Name Cell Value Formula Status Slack

$E$18 Time 200000 $E$18<=$G$18 Binding 0$C$16 Decision variables Nx100 3000 $C$16>=$C$19 Binding 0$D$16 Decision variables Mx100 95500 $D$16>=$D$19 Not Binding 92500

Microsoft Excel 14.0 Sensitivity ReportWorksheet: [Emma Problem.xlsx]Sheet3Report Created: 11/25/2014 11:26:38 AM

Variable CellsFinal Reduced

Cell Name Value Gradient$C$16 Decision variables Nx100 3000 -27.5$D$16 Decision variables Mx100 95500 0

ConstraintsFinal Lagrange

Cell Name Value Multiplier$E$18 Time 200000 47.5

Nx100 Mx100

Sales (units) 20000 80000Sales (dollars) 3000000 8800000Variable costs -700000 -1200000Contribution margin 2300000 7600000Fixed costs -150000 -1500000Profit 2150000 6100000

Assembly time/pair 3 2Pairs 3000Assembly time 9000 6000 15000

ObjectiveContribution/unit 115 95 9417500

Decision variables 3000 95500

Time 3 2 200000 200000Minimum units 3000 3000

Short term tactical decision making AccountantArjit (Manager) Hemant

Material A $1.80 Sunk $9,000.00$2.10 Incremental $10,500.00

Material B $2.50 Sunk $3,750.00$2.65 Irrelevant$2.70 Incremental $4,050.00

Material C $8.50 Sunk $6,800.00$9.50 Irrelevant$5.50 Opportunity $4,400.00

Material D 2000 $33.00 Sunk$45.00 Incremental $90,000.00 90000

$7.00 IrrelevantMaterial D 3000 $33.00 Sunk $99,000.00

$45.00 Irrelevant$7.00 Avoidable -21000

Long term strategic decision makingYogesh (CEO)

$10,500.00

$4,050.00

$4,400.00

90000

$135,000.00

FC 2000VC/unit 120SP/unit 200

2 BEP 25

3 Units to be sold 40

4 Operating income 1600Units to be sold 45

5 Current sales qty 40Total revenue 8000Total FC 2500New VC 5280New total revenue 8800Total cost 7780 Old cost 6800New profit 1020 Old profit 1200No point in advertising

6 New SP 175Qty 50VP 115 At 50 qty,Total cost 7750 Total reve 10000Total revenue 8750 Total cost 8000Profit 1000 Profit 2000No point in reducing price.

8 BEP 25 units 5000Sales 40 units 8000Margin of safety 15 units 3000

9 Option 1 6800Option 2 6800Option 3 6800All options give the same result.