University QMB 2 Assignment Solution: Business Development Analysis

This assignment solution for QMB 2 covers a range of business development concepts, including financial calculations, break-even analysis, and linear programming. The solution addresses multiple questions, providing detailed calculations for total payments, willingness to accept prices, and end-of-quarter balances. It also includes an analysis of break-even points, profit and loss scenarios based on unit sales, and a linear programming model for profit maximization. The assignment uses Microsoft Excel to generate reports and sensitivity analyses, exploring the impact of changes in profit margins and installation times on the optimal production units and total profit. The document concludes with a reference list of academic sources.

Running head: QMB
QMB
Name of the Student:
Name of the University:
Author’s Note:

1QMB
Table of Contents
Answer to Question 1:.....................................................................................................................2
Answer to Question 2:.....................................................................................................................2
Requirement a:.............................................................................................................................2
Requirement b:.............................................................................................................................3
Answer to Question 3:.....................................................................................................................4
Requirement a:.............................................................................................................................4
Requirement b:.............................................................................................................................5
Answer to Question 4:.....................................................................................................................5
Requirement a:.............................................................................................................................5
Requirement b:.............................................................................................................................6
Requirement c:.............................................................................................................................7
Answer to Question 5:.....................................................................................................................8
Requirement a:.............................................................................................................................8
Requirement b:.............................................................................................................................9
Requirement c:...........................................................................................................................11
Requirement d:...........................................................................................................................12
Reference & Bibliography:............................................................................................................14

2QMB

3QMB
Answer to Question 1:
The total amount, required to pay off the plan, would be $95,456.55. The calculations are
shown below:
Particulars Amount
Loan Amount A $50,000
Interest Rate p.a. B 8.50%
Period (in years) C 2.5
Compounding period p.a. D 2
Total Compounding Periods E = CxD 5
Total Loan Amount after 2.5 years F=Ax(1+B/D)^E $61,567.33
Interest Rate p.a. G 8%
Period (in years) H=8-C 5.5
Compounding period p.a. I 12
Total Compounding Periods J = IxH 66
Total Amount of Loan Payable K=Fx(1+G/I)^J $95,456.55
Answer to Question 2:
Requirement a:
Funky Town should be willing to accept $9,631.35 on an item ticketed at $8,000 as per
the following table:

4QMB
Particulars Amount
Item Price A $8,000.00
% of Customer Deposit B 15%
Balance Amount C=Ax(1-B) $6,800.00
Nos. of Monthly Payments D 24
Interest Rate p.a. E 10.80%
Total Due Payable F=Cx(1+E/12)^D $8,431.35
Interest Payable G=F-C $1,631.35
Total Cash Acceptable H=A+G $9,631.35
Requirement b:
From the following table, it can be stated that the Far Out would be willing to accept
$9,468.57 on an item ticketed at $8,000.
Particulars Amount
Item Price A $8,000.00
% of Customer Deposit B 20%
Balance Amount C=Ax(1-B) $6,400.00
Nos. of Monthly Payments D 24
Interest Rate p.a. E 9.60%
Total Due Payable F=Cx(1+E/12)^D $7,748.77
Interest Payable G=F-C $1,348.77
Establishment Fee H $25.00
Account Keeping Fee I $3.95
Total Cash Acceptable J=A+G+H+(IxD) $9,468.57
The customers have to pay lower amount for this deal with Far Out in comparison to the
deal with Funky Town.Hence, this can be consider as better deal for the customers.

5QMB
Answer to Question 3:
Requirement a:
The end-of-the quarter balance in Luxury Rides’ account is shown in the following table:
Year Quarter
Beginning
Balance Deposit
Interest Rate
p.a. Interest Earned
Ending
Balance
A B C D E F=(C+D)x(E/4) G=C+D+F
1 $8,000 7% $140.00 $8,140
2 $8,140 $8,000 7% $282.45 $16,422
3 $16,422 $8,000 7% $427.39 $24,850
4 $24,850 $8,000 7% $574.87 $33,425
5 $33,425 $8,000 7% $724.93 $42,150
6 $42,150 $8,000 7% $877.62 $51,027
7 $51,027 $8,000 7% $1,032.98 $60,060
8 $60,060 $8,000 7% $1,191.05 $69,251
9 $69,251 $8,000 7% $1,351.90 $78,603
10 $78,603 $8,000 7% $1,515.56 $88,119
11 $88,119 $8,000 7% $1,682.08 $97,801
12 $97,801 $8,000 7% $1,851.51 $107,652
13 $107,652 $8,000 7% $2,023.92 $117,676
14 $117,676 $8,000 7% $2,199.33 $127,876
15 $127,876 $8,000 7% $2,377.82 $138,253
16 $138,253 $8,000 7% $2,559.43 $148,813
17 $148,813 $8,000 7% $2,744.22 $159,557
18 $159,557 $8,000 7% $2,932.25 $170,489
19 $170,489 $8,000 7% $3,123.56 $181,613
20 $181,613 $8,000 7% $3,318.23 $192,931
1
2
3
4
5
From the table, it is clear that Luxury Rides would not be able to meet their target with
this strategy.

6QMB
Requirement b:
Year Quarter
Beginning
Balance Deposit
Interest Rate
p.a. Interest Earned
Ending
Balance
A B C D E F=(C+D)x(E/4) G=C+D+F
1 $20,733 7% $362.82 $21,096
2 $21,096 $20,733 7% $732.00 $42,560
3 $42,560 $20,733 7% $1,107.63 $64,401
4 $64,401 $20,733 7% $1,489.84 $86,623
5 $86,623 $20,733 7% $1,878.73 $109,235
6 $109,235 $20,733 7% $2,274.44 $132,242
7 $132,242 $20,733 7% $2,677.06 $155,652
8 $155,652 $20,733 7% $3,086.73 $179,472
9 $179,472 $20,733 7% $3,503.58 $203,708
10 $203,708 $20,733 7% $3,927.71 $228,368
11 $228,368 $20,733 7% $4,359.27 $253,460
12 $253,460 $20,733 7% $4,798.38 $278,992
13 $278,992 $20,733 7% $5,245.18 $304,970
14 $304,970 $20,733 7% $5,699.79 $331,402
15 $331,402 $20,733 7% $6,162.36 $358,297
16 $358,297 $20,733 7% $6,633.03 $385,663
17 $385,663 $20,733 7% $7,111.93 $413,508
18 $413,508 $20,733 7% $7,599.21 $441,840
19 $441,840 $20,733 7% $8,095.02 $470,668
20 $470,668 $20,733 7% $8,599.51 $500,000
2
3
4
5
1
Answer to Question 4:
Requirement a:
It is assumed that the break-even number of units for the stated cost structure and selling
price of $130 per unit are Y units.
Therefore, (Y x $130) = (Y x $80) + $12000
Or, $130Y = $80Y + $12000
Or, $130Y - $80Y = $12000

7QMB
Or, $50Y = $12000
Or, Y = $12000/$50 = 240
The algebric equation denotes that the break-even number of units should be 240 units.
At this level the company would niether generate any profit nor incur any loss. Above this level,
it would be able to earn profit for sale of every unit and it would incur loss from any sales volme
below this level (Taylor 2014). The following graph also denotes the same:
Requirement b:
If the company would sell 200 units in a week at $130 per unit, then as per graph, it
would incurr loss. The amount of loss is calculated below:

8QMB
Particulars Amount
Number of Units A 200
Selling Price per unit B $130
Total Revenue C=AxB $26,000
Variable Cost per Unit D $80
Total Variable Cost E=DxA $16,000
Fixed Cost F $12,000
Total Cost H=E+F $28,000
Weekly Profit/(Loss) I=C-H ($2,000)
Requirement c:
The variable cost per unit of the product is $80. Hence, if the company would sell the
product at $80 per unit, then it would be only be able to cover only the variable cost per unit
from each unit of sale. The fixed costs cannot be covered from the sales revenue (Bjørnenak and
Kaarbøe 2013). Hence, at this selling price, the company can never earn any profit from any unit
of sales.
The company can earn profit of $10,500 by selling 450 units at the rate $130 per unit.
The detail calculations are as follows:
Particulars Amount
Number of Units A 450
Selling Price per unit B $130
Total Revenue C=AxB $58,500
Variable Cost per Unit D $80
Total Variable Cost E=DxA $36,000
Fixed Cost F $12,000
Total Cost H=E+F $48,000
Weekly Profit/(Loss) I=C-H $10,500

9QMB
Answer to Question 5:
Requirement a:
The following points are assumed to formulate the linear programming model for this
problem:
a) Optimum units of Simplex – x1
b) Optimum units of Multiplex – x2
c) Optimum units of Omniplex – x3
d) Maximum Profit - p
The dependent variables for this problem, are therefore must be:
- x 1,x2, x3 > 0
The objective for this problem is presented through the following equation:
- 200x1 + 250x2 + 300x3 = p
The constraints for this problem are as follows:
1) x1 + x2 ≤ 20
2) x3 ≤ 16
3) (60x + 150x + 90x)/60 ≤ 40
4) (18x + 24x + 24x)/60 ≤ 10

10QMB
Requirement b:
Products Units Total Units Profit per Unit Total Profit
Simplex 11 12 $200 $2,133
Multiplex 1 $250 $250
Omniplex 16 16 $300 $4,800
Total Profit for the Company $7,183
Maximum Sellable Units:
Simplex + Multiplex 20
Omniplex 16
Products Units
Installation
Time Total Installation Time
(in minutes) (in hours)
Simplex 11 60 11
Omniplex 1 150 2.5
Multiplex 16 90 24
Total Installation Time 37
Maximum Labor Hour for
Installation 40
Products Units Testing Time Total Testing Time
(in minutes) (in hours)
Simplex 11 18 3.2
Omniplex 1 24 0.4
Multiplex 16 24 6.4
Total Testing Time 10.0
Maximum Labor Hour for Testing 10
Microsoft Excel 12.0 Answer Report
Worksheet: [655018.xlsx]Q.5a
Report Created: 11/17/2017 1:58:12 PM
Target Cell (Max)
Cell Name
Original
Value Final Value

11QMB
$E$1
0 Total Profit for the Company Total Profit $7,183 $7,183
Adjustable Cells
Cell Name
Original
Value Final Value
$B$6 Simplex Units 11 11
$B$7 Multiplex Units 1 1
$B$8 Omniplex Units 16 16
Constraints
Cell Name Cell Value Formula Status Slack
$C$6 Simplex Total Units 12 $C$6<=$C$12
Not
Binding
8.3333333
5
$C$8 Omniplex Total Units 16 $C$8<=$C$13 Binding 0
$D$2
2 Total Installation Time (in hours) 37
$D$22<=$D$2
3
Not
Binding
2.8333333
5
$D$3
2 Total Testing Time (in hours) 10.0
$D$32<=$D$3
3 Binding 0
$B$7 Multiplex Units 1 $B$7>=1 Binding 0
$B$6 Simplex Units 11 $B$6>=1
Not
Binding 10
$B$8 Omniplex Units 16 $B$8>=1
Not
Binding 15
Microsoft Excel 12.0 Sensitivity Report
Worksheet: [655018.xlsx]Q.5a
Report Created: 11/17/2017 1:58:13 PM
Adjustable Cells
Final Reduced
Cell Name
Valu
e Gradient
$B$6 Simplex Units 11 0
$B$7 Multiplex Units 1
-
16.6666600
4
$B$8 Omniplex Units 16 0