Question

Please show how you got each answer

Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand is $200. Her best guess is that she can sell 1000 cups per week at $.80 per cup. The variable cost of producing a cup of lemonade is $.30?

a) given her other assumptions, what level of sales volume will enable Julie to break even using goal seek function

b) given her other assumptions, discuss how a change in sales and variable cost jointly affect profit using the two-way data table

Answer 1

Question 1- Breakeven

At breakeven, the Cost price is equal to selling price. Hence the profit to 0

Step1 : Put the value in excel as shown below as take note of the formulas used

Step 2 : Go to Data -> What if analysis -> Goal Seek

Step 3 : Input the values as shown

Step 4 : The output will be provided

Question Impact of Variable cost and sales on profit.

We have put in the columns the variable in the increasing order an in the column the sales.

In a particular row, as the variable cost increase the profit decreases.
As you move down a column for a given variable cost, the number of lemonade sold increases hence the fixed cost decreases and the profit increases.

For a variable cost 0.3, break even occurs on selling 400 lemonades and beyond that is profit.

The final sheet looks a follows. The formulas are given in the next pick. Please ensure you put the dollar sign correctly to be able to drag the formula to other cells