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Preliminary plans are under way for the construction of a new stadium for a major league baseball team.
Preliminary plans are under way for the construction of a new stadium for a major league baseball team. City officials have questioned the number and profitability of the luxury corporate boxes planned for the upper deck of the stadium. Corporations and selected individuals may buy the boxes for $100,000 each. The fixed construction cost for the upper deck area is estimated to be $1,500,000 with a variable cost of $50,000 for each box constructed. a. Assuming that every box that is built is sold, write an expression for the profit in terms of the number of boxes built and sold. Then use the algebraic approach to find the break-even point such that this number must be exceeded to make it worthwhile to go with this project. b. Let s = sales forecast of the number of boxes that can be sold and Q = the number of boxes built. Write an expression for the profit in terms of these two numbers. c. Formulate a spreadsheet model that will give the profit in part b for any of the two numbers. Use the Excel goal seek command (Data > What-If-2 Analysis > Goal Seek) to calculate the break-even point found in part a. How many boxes should be built when s = 20 and s = 40? What are the corresponding profits?d. Use the data table tool in Excel (Data > What-If-Analysis > Data Table) to calculate the profit realized when s = 40 and Q varies from 0 to 60 in increments of 5, i.e. Q = 0, 5, 10, 15, etc. and then use the graph wizard to graph profit as a function of Q.
