Scenario Manager

1. Using the Automobile.xlsx file:

a. Prepare a Scenario Summary Report for these Scenarios.
Best Case
Most Likely
Worst Case

Year 1 Sales
$ 20,000
$ 10,000
$ 5,000

Sales Growth
20%
10%
2%

Year 1 Price
$10
$7.5
$5

Output: After tax profit for Years 1-5 and NPV

b. Add a scenario named High Price, in which Year 1 price equals $15 and the other two
inputs remain at their most-likely values.
2. Im thinking of starting a store in the local mall to sell gourmet lemonade. Before opening the
store, Im curious about how my profit, revenue, and variable costs will depend on the price I
charge and the unit cost. Use the Scenario Manager to display a report summarizing profit for the
following scenarios:
Scenario
High cost/high price
Medium cost/medium price
Low cost/low price

Price
$5.00
$4.00
$2.50

Unit cost
$1.00
$0.75
$0.40

Fixed cost
$65,000.00
$45,000.00
$25,000.00

Solver
1. For each situation described below, identify the target cell, changing cells, and constraints.
a. I am borrowing $100,000 for a 15-year mortgage. The annual rate of interest is 8
percent. How can I determine my monthly mortgage payment?
b. How should an auto company allocate its advertising budget between different
advertising formats?
c. How should cities transport students to more distant schools to obtain racial balance?
d. If a city has only one hospital, where should it be located?
e. How should a drug company allocate its sales force efforts among their products?
f. A drug company has $2 billion allocated to purchasing biotech companies. Which
companies should they buy?
g. The tax rate charged to a drug company depends on the countr y in which a product is
produced. How can a drug company determine where each drug should be made?
2. Refer to Prodmix.xlsx. Lets say you work for a drug company that produces six different
products at its plant. Production of each product requires labor and raw material. Row 4 in the file
shows the hours of labor needed to produce a pound of each product, and row 5 shows the pounds
of raw material needed to produce a pound of each product. For example, producing a pound
of Product 1 requires six hours of labor and 3. 2 pounds of raw material. For each drug, the
price per pound is given in row 6, the unit cost per pound is given in row 7, and the profit
contribution per pound is given in row 9. For example, Product 2 sells for $11.00 per pound,
incurs a unit cost of $5.70 per pound, and contributes $5.30 profit per pound. The months
demand for each drug is given in row 8. For example, demand for Product 3 is 1,041 pounds.
a. This month, 4,500 hours of labor and 1,600 pounds of raw material are available. How can

this company maximize its monthly profit?

b. Suppose our drug company can purchase up to 500 hours of labor at $1 more per hour
than current labor costs. How can it maximize profit?
c. Assuming that a minimum demand of 200 units for each drug must be met, how can
this company maximize its monthly profit?
d. If whenever the company sells more than 400 pounds of any product, it must give a $1 per
pound discount on each pound above 400 sold. How does this change the answer to the
problem?
3. At a chip manufacturing plant, four technicians (A, B, C, and D) produce three products
(Products 1, 2, and 3). This month, the chip manufacturer can sell 80 units of Product 1, 50 units
of Product 2, and at most 50 units of Product 3. Technician A can make only Products 1 and 3.
Technician B can make only Products 1 and 2. Technician C can make only Product 3. Technician
D can make only Product 2. For each unit produced, the products contribute the following profit:
Product 1, $6; Product 2, $7; and Product 3, $10. The time (in hours) each technician needs to
manufacture a product is as follows:
Product
1
2
3

Technician A
2
Cannot do
3

Technician B
2.5
3
Cannot do

Technician C
Cannot do
Cannot do
4

Technician D
Cannot do
3.5
Cannot do

Each technician can work up to 120 hours per month. How can the chip manufacturer maximize
its monthly profit? Assume a fractional number of units can be produced.
4. A computer manufacturing plant produces mice, keyboards, and video game joysticks. The perunit profit, per-unit labor usage, monthly demand, and per-unit machine-time usage are given in
the following table:
Profit/unit
Labor usage/unit
Machine time/unit
Monthly demand

Mice
$8
0.2 hour
0.04 hour
15,000

Keyboards
$11
0.3 hour
0.055 hour
29,000

Joysticks
$9
0.24 hour
0.04 hour
11,000

Each month, a total of 13,000 labor hours and 3,000 hours of machine time are available. How
can the manufacturer maximize its monthly profit contribution from the plant?
5. Jason makes diamond bracelets, necklaces, and earrings. He wants to work a maximum of 160
hours per month. He has 800 ounces of diamonds. The profit, labor time, and ounces of diamonds
required to produce each product are as follows. If demand for each product is unlimited, how can
Jason maximize his profit?
Product
Bracelet
Necklace
Earrings

Unit profit
$300
$200
$100

Labor hours per unit

0.35
0.15
0.05

Ounces of diamonds per unit

1. 2
0.75
0.5