The company wants to determine the ideal number of basketballs and footballs to manufacture that will maximize the facility’s net profit after taxes.
Prepare a written management report that includes, at a minimum, the following sections:
Purpose of the Report
Description of the Problem
Methodology (which would include the model formulation)
Findings or Results
Recommendations or Conclusions
Be sure to address all relevant points, discuss any assumptions you are making, and highlight the following items in your report:
A recommendation for the number of basketballs and footballs to manufacture that maximizes net profit after taxes given the existing constraints.
A discussion of which constraints are binding and the amount of slack or surplus in the remaining constraints.
A list of recommendations as to what actions the company may take in the future to increase profitability, and how much extra profit the company might expect if the action is taken. Note that these values can be used by the company to determine whether the expected gain in net profit will offset any capital investment required to implement your recommendations.
Remember that you are writing the report from the point of view of a consultant with senior management of ABCD, Ltd. as the intended audience.
You need to assume, or guess, an initial number of production units for each product and proceed with using Excel to calculate your Net Revenue for manufacturing. It is ideal to set up a separate section on your spreadsheet that presents the information to be used in the analysis. This information should be organized under the headings “Changing Cells,” “Constants,” “Calculations,” and “Income Statement.”
Once your spreadsheet model is designed, you can proceed with setting Excel SOLVER to carry the calculation. Excel SOLVER is an add-in for MS Excel that can be used for optimization and other linear programming models. Appendix 7.1 on page of 298 of your textbook provides an overview of how to formulate a model and use Solver to extract the required information.
Please also note that your tax will be applied to your Net profit [TR – TC], and if your total cost [TC] is greater than your total revenue [TR], you will have a loss that will be exempted from tax. So, in calculating your Tax you need to use an “IF Statement”, i.e., IF (profit <=0, then put Tax=0, otherwise calculate Tax).
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