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Assignment
How to build profit models?
Surfing USA, an Internet Service Provider, is considering to offer a service in Laramie County, WY that connects a device directly to televisions and allows customers to either watch TV or access the Internet. The expected price of the service per customer is $26 per month and the variable cost per customer to provide the service is expected to be $17 per month. The number of customers in Laramie County that are expected to subscribe to the service at that price is 20,000 per month.
1. Develop an Excel Model to find the maximum monthly fixed cost that Surfing USA would pay to offer the service in Laramie County and not operate at a loss.
2. Assume that Surfing USA's monthly fixed costs are $100,000 and monthly service cost per customer is $17. The price per customer will affect the monthly demand for the service. Assume that for a monthly price of $26 per customer, the demand will be 20,000 customers and for every $1 increase in price, demand will fall by 2,700 customers. Develop a second Excel Model to recommend a monthly price to Surfing USA and examine the sensitivity of monthly profit to changes in price for prices from $20 to $30.
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