The management of Brinkley Corporation is interested in using
simulation to estimate the profit per unit for a new product. The
selling price for the product will be $45 per unit. Probability
distributions for the purchase cost, the labor cost, and the
transportation cost are estimated as follows:
Procurement
Cost ($) |
Probability |
Labor
Cost ($) |
Probability |
Transportation
Cost ($) |
Probability |
10 |
0.25 |
20 |
0.10 |
3 |
0.75 |
11 |
0.45 |
22 |
0.25 |
5 |
0.25 |
12 |
0.30 |
24 |
0.35 |
|
|
|
|
25 |
0.30 |
|
|
- Compute profit per unit for the base-case, worst-case, and
best-case scenarios.
Profit per unit for the base-case: $
Profit per unit for the worst-case: $
Profit per unit for the best-case: $
- Construct a simulation model to estimate the mean profit per
unit. If required, round your answer to the nearest cent.
Mean profit per unit = $
- Why is the simulation approach to risk analysis preferable to
generating a variety of what-if scenarios?
The input in the box below will not be graded, but may be reviewed
and considered by your instructor.
- Management believes the project may not be sustainable if the
profit per unit is less than $5. Use simulation to estimate the
probability the profit per unit will be less than $5. If required,
round your answer to two decimal places.
%