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# Chapter 1 Homework: 1) Magic Nelson owns a Mug Printing Company. He forecasts demand for his Mugs at 5500 for next year. He charges \$19 per Mug sold. It cost

Chapter 1 Homework:

1) Magic Nelson owns a Mug Printing Company. He forecasts demand for his Mugs at 5500 for
next year. He charges \$19 per Mug sold. It costs him \$40,000 in fixed costs a year to run his
business and \$2.25 per Mug in variable costs.

a) What are Magic’s revenues?
b) What are Magic’s costs?
c) Does Magic make a profit?
d) Construct break-even line graph (Cost, Revenue, Profit) using X values from zero to 3000 at

increment of 100 units.

2) The CompuTex company manufactures home Security System. The company’s fixed monthly
cost is \$49,000, and its variable cost per Security System is \$495. The company sells the
Security System for \$1020.

a) Determine the monthly break-even in number of units and revenue.
b) Construct a break-even graph (Cost, Revenue, profit) using X values from 0 to 200 at increment

of 10 units in Excel.

3) The MediaTex company is going to present a new Smart Speaker in JRB Convention Center. In
this event, MediaTex will present a seminar with a lunch break. The Convention Center Hall
capacity is 550 people. The cost of renting the place is \$6,500/day. The cost of the food and
drinks is \$5.75 per person. The company knows that 50% of the audience buys its product from
the past events, which is priced at \$55. Is JRB Convention Center a profitable place to do this
kind of campaign? Assume full capacity of 550.

4) The MediaTex company has noticed when it advertises, it dramatically increases the number of
customers who buy its product at seminars. With advertising, MediaTex expects the attendees to
buy their product at a price of \$79. The cost of renting a place is \$3900/day. The cost of food and
drinks is \$5.75 per person (assume full capacity of 550). If MediaTex assumes at a minimum it
will sell 125 units, what would be the upper bound on advertising dollars (i.e., where would the
company break even?).

5) Consider the following locations and their fixed and variable costs.

Location Fixed Cost
per Year

Variable Cost
per Unit

USA \$1,000,000 \$25

Mexico \$500,000 \$40

Panama \$700,000 \$30

China \$600,000 \$42

a- Use cross-over analysis to find the range of production that yield minimum total production cost
for each location.

b- Construct linear line graph for all locations for X values from 0 to 150,000 at increment of 5000
units.

c- If the units are sold at price of \$100, which location yields highest profit at production volume of
110,000 units.

d- For part C, construct a break-even graph (cost, revenue, profit) using X values of 0 to 150,000 at
increment of 5,000 units.

Chapter 2 homework

1) Darren knows the information in the following table about assembly times of chair at his Furniture
manufacturing. He notices that as more chairs are assembled the processing time per chair decreases.

Unit Assembly Time
Hours

1 31.2
5 22.7
10 18.8
17 14.5
26 9.8
35 6.9

a) Fit a linear curve to the data. Insert equation and R-squared.
b) Fit a power curve to the data. Insert equation and R-squared.
c) Fit an exponential curve to the data. Insert equation and R-squared.
d) Fit a logarithmic curve to the data. Insert equation and R-squared.
e) Which curve fits best based on R-squared? Explain the interpretation of R-squared value.
f) Use your answer from (e) to predict the 50th unit’s assembly time.

2) You are thinking of opening a Coffee shop. It costs \$6,000 to rent a Coffee Maker for a year. It costs
\$0.79 per cup of coffee to operate the coffee maker. Other fixed costs of running the store amount to
\$9,000 per month (\$108,000.00 per year). You charge an average of \$3.49 per coffee. You are open
360 days per year. Each coffee maker can make up to 30,000 coffees per year.
a) Using Excel, construct a two-way profit table (number of coffee makers on the left running top

to bottom and daily demand on the top running from left to right) for 1 to 5 coffee makers rented
and daily demands of 200, 250, 300, and 350 coffees per day. Calculate annual profit for each of
these combinations of Coffee makers rented and daily demand.

b) If you rent three coffee makers, what daily demand for coffees will allow you to break even?
Draw a break-even graph to show this break-even relationship.

3) Johnny Dollar is trying to save for his retirement. He believes he can earn 5% on average each year
on his retirement fund. Assume that at the beginning of each of the next 40 years, Johnny will
allocate X dollars to his retirement fund. If at the beginning of a year Johnny has Y dollars in his
fund, by the end of the year, it will grow to 1.05 Y dollars.
a) Develop a spreadsheet model to find out how much Johnny should allocate to his retirement fund

each year to ensure that he will have \$1 million at the end of 40 years. What is the total
contribution amount over 40 years?

b) Redo if the compound rate is 9% per year. Compare total contribution amount to part (a).
c) Are there any key factors that are being ignored in our analysis of the amount saved for

retirement?

Chapter 3 homework

1) You are given the following sample data set: 3, 46, 35, 25, 7, 45, 25, 66, 87. Using Excel’s statistical
functions (descriptive statistics), complete the following:
a) Calculate the sample mean, median, and mode.
b) Calculate the sample standard deviation and variance.
c) Find the coefficient of variation (CV) and interpret.

2) The following data were collected on speeds on I-610 highway in Houston. Using Excel’s statistical
functions complete the following questions.

Speed (MPH)
90 57 68 92 78 71 65 69 55 86
95 104 60 67 57 52 63 61 55 53

a) Using Excel data analysis, find the mean, median, and mode of the data set for speed on I-610?
Indicate skewness of data set.

b) What is the standard deviation of the data set for speed on I-610?
c) Construct a histogram for the speed data set using 5 mph as your class width starting with 45 as

your lowest class. What is the skewness based on histogram?

3) The following are numerical statistics for five data sets. Using Excel’s statistical functions, complete
the following questions.

4) the following questions.

Data
Set

Mean Median Range SD

1 50 50 6 2
2 70 100 100 47
3 25 15 92 25
4 50 44.5 60 22
5 33 0 100 41

a) Compare the data sets regarding measures of central tendency. Does the mean equal the median
for each data set? What does it mean if they are equal? Comment on skewness of each data set.

b) Are any data sets similar? Do some data sets appear similar regarding measures of central
tendency but different regarding measures of dispersion? Comment on each data set.

5) The following data were collected on scores (out of a possible 100) for a pretest in quantitative
methods. Using Excel’s statistical functions, complete the following questions.

Data Set 1 Data Set 2
95 75 68 45 25 18
102 67 65 62 17 15
99 87 94 49 37 54
88 120 81 48 70 31
100 71 104 50 21 54

a. What are the means for the two data sets?
b. What are the medians for the two data sets? Is there a difference or similarity between the

mean and median? Explain the similarity or difference.
c. What are the standard deviations for each of the data sets?
d. Construct a histogram for each data set, using 5 as your class width and starting with 60

as your lowest class for data set 1 and 10 for data set 2. Comment on skewness of data
sets.

6) Four years ago, Mary purchased a very reliable automobile. The manufacturer’s warranty has
just expired but the dealership has offered her additional 5-year warranty at cost of \$3995. The
following probability distribution with respect to anticipated cost is given.

Cost (in \$) PROBABILITY
0 0.05

1,000 0.20
2,000 0.45
5,000 0.20
10,000 0.10

Use Excel to calculate the expected value and standard deviation of the cost of repair.

a. If Mary is risk neutral, would you recommend purchase of extended warranty at premium
value of \$3995?

b. Would you recommend purchase of warranty if the warranty is offered at discount rate of
\$2900? Why?

7) Consider the following probability distribution on the expected return of two stocks.

State of Economy Return on X Return on Y Probability
Boom 30% 10% 0.20

Neutral 10% 20% 0.50
Poor -30% 5% 0.30

a. Find the expected return on each stock and make purchase recommendation.
b. Find the standard deviation of return of two stocks and calculate the coefficient of

variations. Which stock has lower risk per unit return?

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