Budgeting Exercise 13 Create a Simple Financial Model L The purpose of this exercise is simply to demonstrate the power of using spreadsheets to provide immediate information for financial decision making Download and save the spreadsheet, and use it to answer the following questions: 1. How much would Widgets Corporation need to increase the price of Widgets in order to make a profit of $30,000? Assume you make no other changes other than increase price. 2. If Widgets Corporation reduces the cost of Direct Materials by $2.00 per unit (from $20 to $18), how does this improve profitability? Assume you make no other changes other than Direct Materials. 3. If Widgets Corporation increases Advertising expenditure by $15,000 (from $10,000 to $25,000), how many more Widgets would have to be sold to break even if price stays the same at $100 each? The spreadsheets incorporates a very important technique called "UNKING", an essential skill for all persons working with spreadsheets for budgeting. If you would like to know more about LINKING click here Widgets Corporation Ltd Selling Price Each $ 100.00 Widgets Corporation Ltd Total Qty Sold Total Sales Per Widget Direct Materials Cost 5 20 Total Direct Costs Direct Labour Cost 5 33 Total Overheads Total cost per Widget 53 Total Qty Bed 5 5,000 Net Profit Total Direct Costs 5 318.000 To solve the above questions, simply make guesses and find the answers by trial and error. It should not take you long. However, if you know how to use Goal Seek then the task is made easier. For help on Goal Seek try the following links: For help on Coal Seck from Microsoft Chick here For You Lube video on Goal Stek Click here Budgeting Exercise 13 Create a Simple Financial Model L The purpose of this exercise is simply to demonstrate the power of using spreadsheets to provide immediate information for financial decision making Download and save the spreadsheet, and use it to answer the following questions: 1. How much would Widgets Corporation need to increase the price of Widgets in order to make a profit of $30,000? Assume you make no other changes other than increase price. 2. If Widgets Corporation reduces the cost of Direct Materials by $2.00 per unit (from $20 to $18), how does this improve profitability? Assume you make no other changes other than Direct Materials. 3. If Widgets Corporation increases Advertising expenditure by $15,000 (from $10,000 to $25,000), how many more Widgets would have to be sold to break even if price stays the same at $100 each? The spreadsheets incorporates a very important technique called "UNKING", an essential skill for all persons working with spreadsheets for budgeting. If you would like to know more about LINKING click here Widgets Corporation Ltd Selling Price Each $ 100.00 Widgets Corporation Ltd Total Qty Sold Total Sales Per Widget Direct Materials Cost 5 20 Total Direct Costs Direct Labour Cost 5 33 Total Overheads Total cost per Widget 53 Total Qty Bed 5 5,000 Net Profit Total Direct Costs 5 318.000 To solve the above questions, simply make guesses and find the answers by trial and error. It should not take you long. However, if you know how to use Goal Seek then the task is made easier. For help on Goal Seek try the following links: For help on Coal Seck from Microsoft Chick here For You Lube video on Goal Stek Click here