A word processed managerial report and Excel file(s) showing your work Part I. P

Question

A word processed managerial report and Excel file(s) showing your work Part I. Profit model Surf Fast, an Internet service provider, is considering to offer a service in Cobb County GA. They plan to charge $26 per customer for the service per month. About 20,000 customers in the county are expected to subseribe the service at that price. Note that the price per customer will affect the monthly demand for the service. Assume that each $1 increase (decrease) in price, demand wil fall (lmb) by 2.700 customers as shown below. Possible price range is betweern $20 and $30. Price Demand Ad effect $20 36200 $21 33500 280 S22 30800 260 s23 28100240 $24 25400 220 $25 22700 200 $26 20000 180 $27 17300 160 $28 14600 140 $29 11900120 $30 9200 100 In addition to the price change, Surf Fast expects it can influence the demand through advertising. The cost of running an ad is S1,500 per day. The expected increase in the demand for a month for each day the ad is run is estimated in the table above (Ad effect). For example, for the price of S20, one day of ad running will increase the demand for a month to 36,500 36,200; two day of running the ad will increase the demand to 36,800; and so on. from For the simplicity, assume that the effect of running an ad is immediate. (In real world , the effect delayed. For example, running an ad in January may affect the sale of February.) Further, the effect of ad is uniform regardless of how many days to run. Surf Fast's monthly fixed costs are $100,000. The estimated variable cost to provide the service 1. After building a model, using data-table, find the best price to maximize the monthly profit if 2. If advertising is run, what is the best price AND the number of days to run the ad? Find the is $17 per customer per month no advertising is run. wer using 2-way data-table. (Hint: I recommend to have demands ("Demand @ price" and "Demand @ ad"), and use the latter one answer using 2-way data-table. (Hint: I recommend to have demands ("Demand @ price"

Explanation / Answer

Answer 1:

consider 1st example of proce $20 . Fixed cost is 100000 , variable cost = $17* 36200 ( Demand ) = 615400

So the total cost for providing service to 36200 customers is = 100000+615400= 715400

Now Selling price for 36200 customers = 36200 * $20 = $724000

Profit = SP- CP = 724000-715400= $8600.

Similarly we calcualte for the all the cases

Below is the profit

The Above table says profit is maximum if sold at price $25 i.e $ 81600

Answer 2 :

Please find the below table

considering the advertising cost of $1500 per day and demand effect

the profit is calcualted in below table for 30 days

the profit is $ 86900 which is maximum if add is run for 30 days and Selling price is $21.

Price Demand Fixed Cost variable Cost Cost without ad Selling price Without add Profit without add for 30 days 20 36200 100000 615400 715400 724000 8600 21 33500 100000 569500 669500 703500 34000 22 30800 100000 523600 623600 677600 54000 23 28100 100000 477700 577700 646300 68600 24 25400 100000 431800 531800 609600 77800 25 22700 100000 385900 485900 567500 81600 26 20000 100000 340000 440000 520000 80000 27 17300 100000 294100 394100 467100 73000 28 14600 100000 248200 348200 408800 60600 29 11900 100000 202300 302300 345100 42800 30 9200 100000 156400 256400 276000 19600

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