Input Data Model:

Unit Cost
Unit Price
Demand / Quantity Sold
Fixed Cost
Discount-rate

$
$
$

3.00
3.40
65,000
20,000.00
8%

Business Spreadsheet:

Variable Costs
Total Costs
Revenues
Gross Profit
Discounted Gross Profit

$
$
$
$
$

195,000.00
215,000.00
221,000.00
6,000.00
5,555.56

Total Gross Profit

NPV

15,462.58
$15,462.58

$ 195,000.00 $ 195,000.00
$ 215,000.00 $ 215,000.00
$ 221,000.00 $ 221,000.00
$
6,000.00 $
6,000.00
$
5,144.03 $
4,762.99

Scenario outcomes:
Scenario 1 (most likely)
Scenario 2 (best case)
Scenario 3 (worst case)

Discount Rate Fixed Cost

Unit Cost
8%
$20,000.00
$3.00
6%
$18,000.00
$2.90
11%
$22,000.00
$3.20

One-variable data table:

6%
7%
8%
9%
10%
11%
Two-variable data table:
$15,462.58
6%
7%
8%
9%
10%
11%
Goal Seek:
Yield Profit $500
Discount Rate
Unit Price
Yield Profit $0, Break-Even

$15,462.58
$16,038.07
$15,745.90
$15,462.58
$15,187.77
$14,921.11
$14,662.29

$3.20
-$8,553.64
-$8,397.81
-$8,246.71
-$8,100.14
-$7,957.93
-$7,819.89

$3.30
$2,673.01
$2,624.32
$2,577.10
$2,531.29
$2,486.85
$2,443.71

$3.40
$16,038.07
$15,745.90
$15,462.58
$15,187.77
$14,921.11
$14,662.29

1199%
$3.24 Note: Demand adjusted to 84,000 units as a result o

Unit Cost

$3.09

It is evident that change in unit price has a direct effect on profit. Pricing the product
below $3.30 will result in a net loss for that period. Margins must exceed 20 cents in orde
to generate profit assuming the unit cost is at $3.00.

For the company to break-even, the unit cost must be less than or equal to $3.09,
assuming all other variable are consistent with the given data (unit price = $3.40). In this
case, margins exceed 20 cents and the company will see profits in that period, just as
previously suggested.

It is also apparent that increasing the discount rate will lower discounted groos profit an
therefore gross profit as well. This change is independent of all other variables and will yi
the same effect regardless of unit price or unit cost.

Unit Price
$
$
$
$
$

3.20
3.30
3.40
3.50
3.60

Units Sold
84000
70000
65000
55000
40000

Total Profit/Loss
$15,462.58
$38,758.67
-$21,993.43

$3.50
$20,047.59
$19,682.37
$19,328.23
$18,984.71
$18,651.39
$18,327.86

$3.60
$10,692.05
$10,497.26
$10,308.39
$10,125.18
$9,947.41
$9,774.86

ed to 84,000 units as a result of VLOOKUP function

rofit. Pricing the product

ust exceed 20 cents in order

an or equal to $3.09,
(unit price = $3.40). In this
ts in that period, just as

r discounted groos profit and

l other variables and will yield

Scenario Summary
Current Values:

Most Likely

Changing Cells:
Discount_Rate
8%
8%
Unit_Cost
$
3.00 $
3.00
Fixed_Cost
$
20,000.00 $
20,000.00
Result Cells:
Total_Discounted_Gross_Profit
$
15,462.58 $
15,462.58
Notes: Current Values column represents values of changing cells at
time Scenario Summary Report was created. Changing cells for each
scenario are highlighted in gray.

Best Case

Worst Case

$
$

6%
2.90 $
18,000.00 $

11%
3.20
22,000.00

38,758.67 $

(21,993.43)