For both problems assume that quantity produced = quantity demanded = quantity sold
The owner/manager of Randy Nets, a small sporting goods store, is considering a plan to offer a service to string tennis rackets.
Martina Shoz, the weekend manager has analyzed the costs and estimated materials and labor cost for each racket would be $19.00 and fixed cost that must be covered will be $2000.
Martina suggests that they charge $37.50 per racket for the service.
Set up the profit model and use it to answer the following questions. Note: only one model needs to be created and used for all of the questions below.
How many tennis racket stringing jobs would the store need to break even? (use Excel Goal-Seek function)
What is total revenue at the break-even point?
Create a one-way table to show the sensitivity of profit to the variable cost per unit. (You must use Excel Data Table function for this)
Use variable cost values of $14.00, $16.00, $18.00 and $20.00. Set Quantity to 150
Create a graph of your table results.