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Sensitivity Analysis and Profit

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Sensitivity Analysis

The Whirlwind Corporation manufactures two electrical products: Ceiling fans and floor fans. The assembly process for each is similar, and both require a certain amount of labor and certain amount of wiring. Each ceiling fan requires 4 hours of labor and 2 feet of wiring. Each floor fan requires 2 hours of labor and 3 feet of wiring. During the next production period up to 240 hours of labor is available and 180 feet of wiring is available. Each ceiling fan can be sold at a unit profit of $75 and each floor fan can be sold at a unit profit of $50. Whirlwind will have no trouble selling all the fans it has in its inventory, and also Whirlwind is interested in making the most profit it could make.

Now Whirlwind has some options - changing the unit for profits on the fans!
How much does the unit profit on floor fans have to change to (increase) (use Whole dollars) - with the unit profit of ceiling fans remaining the same such that the optimal decision for Whirlwind will be to manufacture all floor fans?

Solve in Excel.

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Solution Summary

This solution provides a step by step solution illustrating how to compute for the change in the unit price of floor fans. The solution is provided in an attached Excel file and includes a section which interprets the meaning of the results generated.

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