Background

 

 The Great Threads Company sells hand knit sweaters and plans to print a catalog of its products and possibly undertaking a direct mail campaign.

 

 

Objective

1.      How does a change in response rate affect profit?

2.      For what response rate does the company breakeven?

3.      If the company estimates response rate of 3% should it proceed with the mailing?

4.      How does the presence of uncertainty affect usefulness of the model?

 

 

 

 

Decision and External Variables

  The decision variable is variable costs. The external variable is the response rate.

 

 

Spreadsheet Model

 

 

 

Analyses

1. Changes in response rate affect profit due to increases as response rates varies
2. This is where the use of Goal Seek takes place. Goal Seek solves for an equation( Profit= 0) in a single unknown( Response Rate). The breakeven point is 5.77% therefore if it is higher, the company loses.
3. The answer to this question is No because the profit would be negative.
4. Uncertainty affects the usefulness of the model because it focuses on the probability of a certain value and not the breakeven of a response rate.

 

 

 

Recommendations

 

That the layout could be modified in which all the inputs and outputs could be put together. In addition, the chart should definitely be placed on the same sheet instead on  along with the data.