a. Construct a simulation model to estimate the average profit per unit. What is a 95% confidence interval around this average? b. 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. What is a 95% confidence interval around this proportion?

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a. Construct a simulation model to estimate the average profit per unit. What is a
95% confidence interval around this average?
b. 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. What is a 95% confidence interval around this
proportion?
Transcribed Image Text:a. Construct a simulation model to estimate the average profit per unit. What is a 95% confidence interval around this average? b. 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. What is a 95% confidence interval around this proportion?
Question:
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 $45 per unit. Probability distributions for the purchase cost, the labor
cost, and the transportation cost are estimated as follows:
Procurement
Cost ($)
10
11
12
Labor
Probability Cost
($)
20
0.25
0.45
0.30
22
24
25
Probability
0.10
0.25
0.35
0.30
Transportation
Cost ($)
3
LO
5
Probability
0.75
0.25
Transcribed Image Text:Question: 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 $45 per unit. Probability distributions for the purchase cost, the labor cost, and the transportation cost are estimated as follows: Procurement Cost ($) 10 11 12 Labor Probability Cost ($) 20 0.25 0.45 0.30 22 24 25 Probability 0.10 0.25 0.35 0.30 Transportation Cost ($) 3 LO 5 Probability 0.75 0.25
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