Your CWID :
Your Name:
361B Project2
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 $45 per unit. Probability distributions for the
purchase cost, the labor cost, and the transportation cost are estimated as follows:
Procurem
ent Cost
per unit
($)
Probabi
lity
Lab
or
Cos
t
per
uni
t
($)
Probabi
lity
Transporta
tion Cost
per unit ($)
Probabi
lity
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
1.
1. Compute profit per
unit for base-case (most likely), worst-
case, and best-case scenarios.
Base Case using most likely costs
Profit
=
Worst Case
Profit
=
Best Case
Profit
=
2.
2. Construct a
simulation model to estimate the
mean profit per unit.
3.
Use 5000 simulations.
The average profit from the simulation model should be
approximately:
4.
3. Why is the
simulation approach to risk analysis
preferable to generating a variety of
what-if scenarios?
[write your paragraph here]
5.
4. Management
believes that the project may not be
sustainable if the profit per unit is less
than $5. Use simulation to estimate
the probability that the profit per unit
will be less than $5.
6.
[write your paragraph here]
1
