Eastman Publishing Company is considering publishing an electronic textbook
about spreadsheet applications for business. The fixed cost of manuscript
preparation, textbook design, and website construction is estimated to be
$160,000. Variable processing costs are estimated to be $6 per book. The
publishing plans to sell-user access to the book for $46.
a. Build a spreadsheet model to calculate the profit/loss for a given demand.
What profit can be anticipated with a demand of 3,500 copies? (10)
b. Use a data table to vary demand from 1,000 to 6,000 in increments of
200 to assess the sensitivity of profit to demand. (10)
c. Use Goal Seek to determine the access price per copy that the publisher
must charge to break even with a demand of 3,500 copies. (10)
d. Consider the following scenarios: (10)
Scenario 1 Scenario 2 Scenario 3 Scenario 4 Scenario 5
Variable Cost/Book $6 $8 $12 $10 $11
Access Price $46 $50 $40 $50 $60
Demand 2500 1000 6000 5000 2000
For each of these scenarios, the fixed cost remains $160,000. Use
Scenario Manager to generate a summary report that gives the profit for each of
these scenarios. Which scenario yields the highest profit? Which scenario yields the
lowest profit?
- Construct a spreadsheet simulation model to simulate 1,000 rolls of a die with
the six sides numbered 1, 2, 3, 4, 5 and 6.
a. Construct a histogram of the 1,000 observed dice rolls. (10)
b. For each roll of two dice, record the sum of the dice. Construct a
histogram of the 1,000 observations of the sum of two dice. (10)
c. For each roll of three dice, record the sum of the dice. Construct a
histogram of the 1,000 observations of the sum of three dice. (10)
d. For each roll of four dice, record the sum of the dice. Construct a
histogram of the 1,000 observations of the sum of four dice. (10) - What analytical methods are you planning to use in the group project?
Sample Solution