EMBA
Spreadsheet Modeling Assignments
Fall, 2012
This first assignment requires you to develop and solve a spreadsheet model to determine
the number of units of a product that should be produced in-house and the number of units
that should be purchased.
The Electro-Poly Corporation manufactures slip rings. The company recently received a
$750,000 order for various quantities of three models of slip rings. Each slip ring requires a
certain amount of time to wire and harness. He following table summarizes the requirements for
the three models of slip rings.
Model 1 Model 2 Model 3
Number Ordered
3,000
2,000
900
Hours of Wiring
2
1.5
3
Required per Unit
Hours of Harnessing
1
2
1
Required per Unit
Unfortunately, Electro-Poly does not have enough wiring and harnessing capacity to fill the
order by its due date. The company has only 10,000 hours of wiring capacity and 5,000 hours of
harnessing capacity available to devote to this order. However, the company can subcontract any
portion of this order to one of its competitors. The unit costs of producing each model in-house
and buying the finished product from a competitor are summarized below.
Cost to Make
Cost to Buy
Model 1
$50
$61
Model 2
$83
$97
Model 3
$130
$145
Electro-Poly needs to determine the number of slip rings of each model to make and the number
to buy to fill the customer order at the least possible cost.
a.
Develop and solve a spreadsheet model that determines the quantity of each model to
make and buy so that total cost is minimized. How many units of each model should be
made? How many units of each model should be purchased? What is the total cost of
your make or buy decision?
b. Given your solution in part (a), which do you think is more valuable to Electro-Poly: an
additional 200 hours of wiring time, or an additional 200 hours of harnessing time?
Why?
c. Suppose the price to purchase each of the three models is changed to a price of $101
regardless of the model type. Does this change the answer you found in part (a)? If so,
how? (Electro-Poly now has only 10,000 hours of wiring time and 5,000 hours of
harnessing time as in part (a))
This second assignment requires that you develop a spreadsheet simulation of a profit
analysis.
A firm produces radios for the consumer market. Their profit function is:
Profit = (unit price – unit cost)*(quantity sold) – fixed costs
Suppose that the unit price is $140 per radio, and that the other variables have the following
probability distributions:
Unit Cost
$80
$90
$100
$110
Probability
0.20
0.40
0.30
0.10
Quantity Sold
1,000
2,000
3,000
Probability
0.10
0.60
0.30
Fixed Costs
$50,000
$65,000
$80,000
Probability
0.40
0.30
0.30
Develop a spreadsheet model to evaluate expected profitability. Run the simulation 100 times.
Identify the average profit, the number of times there was a loss, the maximum loss, and the
maximum profit from your simulation. (Helpful Hints: Use A Data Table to Replicate the
Simulation. Excel’s countif function is useful for determining the number of times there was a
loss).