Construct a concept diagram and a mathematical model

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Assignment - Data spreadsheet and decision making

Irene has always designed her own birthday cards. In fact she enjoys designing cards so much that she is considering starting up a card design business. She will work from home, and market her cards by means of hand-delivered pamphlets. She employs a delivery person to deliver these pamphlets at 5 cents per pamphlet. Printing these pamphlets costs a fixed sum of $2,500, plus an extra 12 cents for each pamphlet printed. Cards come in bundles of 20 for a price of $80, of which $50 covers Irene's variable production costs. Most customers only purchase one bundle of 20 cards at a time.

(a) Suppose Irene decides to print and deliver 2000 pamphlets. Construct a concept diagram and a mathematical model. Consider a trial response rate of 10%.

(b) Construct a spreadsheet model and determine the estimated profit based on this trial response rate. Should Irene start up her business?

(d) Graph the response rate against the resulting profit figures. Based on the chart and Part (d), what is the estimated minimum response rate required for Irene's business to break even? Using Goal Seek determine a more precise answer.

(e) Irene is willing to continue delivering pamphlets even if the response rate is 3%. Explain her reasoning behind this.

(f) How do your results change if, instead of a per-pamphlet rate, the delivery person is paid a one-off sum of $50 plus a commission of $1 per bundle of cards sold? Identify other factors that would influence your results.

Reference no: EM132307157

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