Description
In the summer of 2016, a real estate investment company was planning management and budgeting for apartment rental units in Pittsburgh, Pennsylvania, a U.S. city with a large student population. The company needed to determine the various unit agreement terms—by year, by semester (fall, spring, and summer), and by month—using software to find optimal rents. Using Excel’s Solver tool, the optimal rents needed to be determined and incorporated into a projected profit and loss budget for fiscal year 2017.
Learning Objective
This multipurpose case can be used in undergraduate or graduate courses on cost accounting or operations research, or in a capstone course in business to illustrate the following: ·How to work with pricing and volume scenarios with multiple solutions based on specified constraints, and how to work through a maximization problem ·How the generated results of a constraint problem are useful in terms of management decision-making, and how the results serve as a check on potentially unrealistic (overly optimistic) assumptions when preparing a budget ·How managers are often faced with a number of options in terms of decision-making