1. Southwest Clothing Company, produces denim jeans, is planning to introduce a new line of lime...

1. Southwest Clothing Company, produces denim jeans, is planning to introduce a new line of lime green jeans. Each pair of jeans costs $5.50 for fabric and $3.00 for labor. Each pair will be sold for $24.99 each. Fixed costs are estimated as $10,000 per month. Southwest intends to build an EXCEL model to explore the options for production.

a. Set up a spreadsheet model to calculate total profit with production quantity as the decision variable - assuming that Southwest will sell all of the jeans that are produced.

b. Use the Excel tool Data/What-If Analysis/Goal Seek to determine the break-even quantity for the jeans.

c. Use the Excel tool Data/What-If Analysis/Data Table to create a one-way table to demonstrate the sensitivity of profit to changes in selling price per pair of jeans

Use prices of 21.99 23.99 25.99, 27.99 and 31.99 in your table.

d. Create a graph of the one-way table results.

Solutions

Expert Solution

	(Dollars)	(Dollars)	(Dollars)	(Dollars)	(Dollars)	(Dollars)
Price (Per Unit)	24.99	21.99	23.99	25.99	27.99	31.99
Units Sold	606.4281	606.4281	606.4281	606.4281	606.4281	606.4281
Total Revenue	15154.64	13335.35	14548.21	15761.07	16973.92	19399.64

Fixed Cost	10000	10000	10000	10000	10000	10000
Fabric Cost (Per Unit)	5.5	5.5	5.5	5.5	5.5	5.5
Labor Cost (Per Unit)	3	3	3	3	3	3
Cost (Per Unit)	8.5	8.5	8.5	8.5	8.5	8.5
Total Cost	15154.64	15154.64	15154.64	15154.64	15154.64	15154.64

Profit	0	-1819.28	-606.428	606.4281	1819.284	4244.997

Price (Per Unit)	Profit (606.4281 units sold)

21.99	-1819.284415
23.99	-606.4281383
24.99	0
25.99	606.4281383
27.99	1819.284415
31.99	4244.996968

Colby Messinger answered 1 year ago

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