INDIAN INSTITUTE OF MANAGEMENT BANGALORE
Spreadsheet Models for Business Decision Problems
(Due 11:30 pm, Jan 7th 2014)
Malgudi Tindi Room (MTR) Inc. is a well-known food processing major operating from Bangalore. Its product offerings vary from assorted pickles, instant packaged foods (dosa mix, idly mix etc), spices and snacks. It is looking at developing a new microwavable ‘chinese food tray’ consisting of sweet corn soup in a plastic pouch, ‘hakka’ noodles and gobi manchurian. This product is targeted towards young urban working professionals and families with young working parents. Based on an initial analysis, the decision makers at MTR Inc ...view middle of the document...
Truncate the distribution at ‘zero’ trays at the lower end and 50 at the upper end.
4. The variable cost of producing this item in Year 1 is either Rs 20 or Rs 25. It is a function of the production technology used to make this item. At the moment, there are two alternatives being considered, with each being equally likely.
5. The proposed sales price for this item in Year 1 is Rs 40.
6. As per current thinking, the sales price and the variable cost of producing this item is ‘budgeted’ to increase by 5% annually.
7. The initial fixed cost of developing this product, as well as developing the technology for producing it in a large scale, is likely to be Rs 3 crore or Rs 5 crore. Assume each to be equally likely and that it is incurred in year 0.
8. Currently, there is only one competitor in the market who is likely to offer a competing product. Each year, there is a 20% chance that a new competitor will enter the market with a similar product offering. The market can ‘accommodate’ at most four competitors. That is, once there are four competitors in the market, other potential competitors would be ‘discouraged’ from entering it.
9. The impact of fresh competitors entering the market is best described as follows: In Year t (t>1), the estimated sales for MTR...