A company that manufactures small canoes has a fixed cost of$18,000. It costs $120 to produce each canoe. The selling price is$480 per canoe. (In solving this exercise, let x represent the number ofcanoes produced and sold.)

Given,Fixed Costs = 18,000Variable costs = 120xTotal Cost (C) = 18,000 + 120x............Price (P) =…

Answered: A company that manufactures small…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter11: Simulation Models

Section: Chapter Questions

Problem 74P: In this version of dice blackjack, you toss a single die repeatedly and add up the sum of your dice...

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In this version of dice blackjack, you toss a single die repeatedly and add up the sum of your dice tosses. Your goal is to come as close as possible to a total of 7 without going over. You may stop at any time. If your total is 8 or more, you lose. If your total is 7 or less, the house then tosses the die repeatedly. The house stops as soon as its total is 4 or more. If the house totals 8 or more, you win. Otherwise, the higher total wins. If there is a tie, the house wins. Consider the following strategies: Keep tossing until your total is 3 or more. Keep tossing until your total is 4 or more. Keep tossing until your total is 5 or more. Keep tossing until your total is 6 or more. Keep tossing until your total is 7 or more. For example, suppose you keep tossing until your total is 4 or more. Here are some examples of how the game might go: You toss a 2 and then a 3 and stop for total of 5. The house tosses a 3 and then a 2. You lose because a tie goes to the house. You toss a 3 and then a 6. You lose. You toss a 6 and stop. The house tosses a 3 and then a 2. You win. You toss a 3 and then a 4 for total of 7. The house tosses a 3 and then a 5. You win. Note that only 4 tosses need to be generated for the house, but more tosses might need to be generated for you, depending on your strategy. Develop a simulation and run it for at least 1000 iterations for each of the strategies listed previously. For each strategy, what are the two values so that you are 95% sure that your probability of winning is between these two values? Which of the five strategies appears to be best?
Big Hit Video must determine how many copies of a new video to purchase. Assume that the companys goal is to purchase a number of copies that maximizes its expected profit from the video during the next year. Describe how you would use simulation to shed light on this problem. Assume that each time a video is rented, it is rented for one day.
The game of Chuck-a-Luck is played as follows: You pick a number between 1 and 6 and toss three dice. If your number does not appear, you lose 1. If your number appears x times, you win x. On the average, use simulation to find the average amount of money you will win or lose on each play of the game.
You now have 5000. You will toss a fair coin four times. Before each toss you can bet any amount of your money (including none) on the outcome of the toss. If heads comes up, you win the amount you bet. If tails comes up, you lose the amount you bet. Your goal is to reach 15,000. It turns out that you can maximize your chance of reaching 15,000 by betting either the money you have on hand or 15,000 minus the money you have on hand, whichever is smaller. Use simulation to estimate the probability that you will reach your goal with this betting strategy.
The IRR is the discount rate r that makes a project have an NPV of 0. You can find IRR in Excel with the built-in IRR function, using the syntax =IRR(range of cash flows). However, it can be tricky. In fact, if the IRR is not near 10%, this function might not find an answer, and you would get an error message. Then you must try the syntax =IRR(range of cash flows, guess), where guess" is your best guess for the IRR. It is best to try a range of guesses (say, 90% to 100%). Find the IRR of the project described in Problem 34. 34. Consider a project with the following cash flows: year 1, 400; year 2, 200; year 3, 600; year 4, 900; year 5, 1000; year 6, 250; year 7, 230. Assume a discount rate of 15% per year. a. Find the projects NPV if cash flows occur at the ends of the respective years. b. Find the projects NPV if cash flows occur at the beginnings of the respective years. c. Find the projects NPV if cash flows occur at the middles of the respective years.
The file P02_41.xlsx contains the cumulative number of bits (in trillions) of DRAM (a type of computer memory) produced and the price per bit (in thousandth of a cent). a. Fit a power curve that can be used to show how price per bit drops with increased production. This relationship is known as the learning curve. b. Suppose the cumulative number of bits doubles. Create a prediction for the price per bit. Does the change in the price per bit depend on the current price?
You now have 10,000, all of which is invested in a sports team. Each year there is a 60% chance that the value of the team will increase by 60% and a 40% chance that the value of the team will decrease by 60%. Estimate the mean and median value of your investment after 50 years. Explain the large difference between the estimated mean and median.
Assume the demand for a companys drug Wozac during the current year is 50,000, and assume demand will grow at 5% a year. If the company builds a plant that can produce x units of Wozac per year, it will cost 16x. Each unit of Wozac is sold for 3. Each unit of Wozac produced incurs a variable production cost of 0.20. It costs 0.40 per year to operate a unit of capacity. Determine how large a Wozac plant the company should build to maximize its expected profit over the next 10 years.
Barbara Flynn sells papers at a newspaper stand for $0.40. The papers cost her $0.30, giving her a $0.10 profit on each one she sells. From past experience Barbara knows that: a) 20% of the time she sells 150 papers. b) 20% of the time she sells 200 papers. c) 30% of the time she sells 250 papers. d) 30% of the time she sells 300 papers. Assuming that Barbara believes the cost of a lost sale to be $0.05 and any unsold papers cost her $0.30 and she orders 250 papers. Use the following random numbers: 14, 4, 13, 9, and 25 for simulating Barbara's profit. (Note: Assume the random number interval begins at 01 and ends at 00.) Based on the given probability distribution and the order size, for the given random number Barbara's sales and profit are (enter your responses for sales as integers and round all profit responses to two decimal places): Random Number Sales Profit 14 4 13 9 25
CLV = Profit per year X Number of years as a customer (lifetime) less customer acquisition costs And we can use the churn rate % to tell us how many years our average customer stay by dividing 1/churn rate. In our case that is 1/20% = 5 years = customer lifetime. A supermarket chain ran a social media campaign and they got 2,000 new customers. The TOTAL cost of the campaign was $250,000. These customers visited the supermarket 25 times a year. Each customer spends $100 per visit and the supermarket makes a 4% profit margin on the customer’s spend. The retention rate of the customers is 60%. What is their CLV? Assume that the profit margin is based on the customer’s non-discounted spend, then deduct the discount.
Williams Auto has a machine that installs tires. The machine is now in need of repair. The machineoriginally cost $10,000 and the repair will cost $1,000, but the machine will then last two years.The labor cost of operating the machine is $0.50 per tire. Instead of repairing the old machine,Williams could buy a new machine at a cost of $5,000 that would also last two years; the labor costwould then be reduced to $0.25 per tire. Should Williams repair or replace the machine if it expectsto install 10,000 tires in the next two years?
A piece of industrial machinery costs $48,000 to replace and has essentially no salvagevalue. Over the first five years of operation, maintenance costs amounted to $8,000. Ifthe maintenance cost rate is a linear function of time, what is the optimal age at whichto replace the machinery?

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A company that manufactures small canoes has a fixed cost of $18,000. It costs $120 to produce each canoe. The selling price is $480 per canoe. (In solving this exercise, let x represent the number of canoes produced and sold.)