Question

In: Operations Management

Kaizer Plastics produces a variety of plastic items for packaging and distribution. One item, container #145,...

Kaizer Plastics produces a variety of plastic items for packaging and distribution. One item, container #145, has had a low contribution to profits. Last year, 20,000 units of container #145 were produced and sold. The selling price of the container was $25 per unit, with a variable cost of $16 per unit and a fixed cost of $70,000 per year.

(a) Construct a correct, flexible, and documented base-case spreadsheet model that allows the user to easily vary the inputs to the problem and see the resulting revenue, costs, and profit. What is the profit level for the base case?

(b) Using the model and Goal Seek, find the break-even quantity.

(c) Construct a Data Table and chart showing profit versus quantity. Vary the quantity from 0 to 70000 in increments of 5000.

Expert Solution

(a) Construct a correct, flexible, and documented base-case spreadsheet model that allows the user to easily vary the inputs to the problem and see the resulting revenue, costs, and profit. What is the profit level for the base case?

Profit- Revenue – variable costs- fixed costs

Revenue =number of units sold* selling price

Variable costs = number of units sold* variable cost per unit

Fixed cost per year= $70000

Profit level for base case (20000 units sold)= $110,000

(b) Using the model and Goal Seek, find the break-even quantity.

At breakeven point, profit =0 . It shows the number of units required to meet the total costs

Goal seek

DATA-> WHAT IF- Goal seek

Break even quantity =7778 units (approximately)

'

(c) Construct a Data Table and chart showing profit versus quantity. Vary the quantity from 0 to 70000 in increments of 5000.

For inserting chart, click the profit column g6-g20 and then click Insert-> line- stacked line with markers
Then we can right click the chart to edit the data
Also we can click ‘ layout’ in tabs to edit the chart titles

keosha answered 2 years ago

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