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New and improved budgeting exercise Exercise 13: Create a Simple Financial Model

Exercise Overview

The purpose of this exercise is simply to demonstrate the power of using spreadsheets to provide immediate information for financial decision making.

Exercises Instructions

Download the activity sheet for Budgeting Exercise 13

Download and save the spreadsheet for Budgeting Exercise 13, and use it to answer the following questions:


How much would Widgets Corporation need to increase the price of Widgets in order to make a profit of $30,000? Assume you make no other changes other than increase price.


If Widgets Corporation reduces the cost of Direct Materials by $2.00 per unit (from $20 to $18), how does this improve profitability? Assume you make no other changes other than Direct Materials.


If Widgets Corporation increases Advertising expenditure by $15,000 (from $10,000 to $25,000), how many more Widgets would have to be sold to break even, if price stays the same at $100 each?

The spreadsheets incorporates a very important technique called "LINKING", an essential skill for all persons working with spreadsheets for budgeting. If you would like to know more about LINKING click here.

illustration of budgeting exercise

To solve the above questions, simply make guesses and find the answers by trial and error. It should not take you long. However, if you know how to use 'Goal Seek' then the task is made easier. For help on Goal Seek try the following links:


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answers to budgeting exercises