Assume that the operations manager of a small semi-conductor manufacturer wants to run a Simulation model to better understand the uncertainties related to cost and demand for a particular product. He assumes that the total cost per month could be anywhere between $150,000 and $200,000 with equal likelihood. He also assumes that the demand is normally distributed with a mean of 5,000 items per month and a standard deviation of 1,000. Each item is sold for $95. a) Use the random numbers in the following table to simulate the costs, revenues and profits per month. Use Random Number A to generate the costs and Random Number B to generate the revenues per month and then calculate the profit as the difference between revenues and costs. Complete the table by reporting the minimum, maximum and average profit per month according to this simulation. Trial 1 2 3 4 5 6 7 00 8 9 10 Random A 0.23 0.04 0.14 0.07 0.03 0.67 0.26 0.03 0.83 0.32 Cost Random B 0.75 0.89 0.82 0.33 0.96 0.67 0.46 0.26 0.16 0.75 Revenues Minimum: Maximum: Average: Profit Note that I generated the random numbers for you (independently of each other). So, you don't have to use the "=RAND()" function. b) Can you think of a major flaw in this simulation model?
Assume that the operations manager of a small semi-conductor manufacturer wants to run a Simulation model to better understand the uncertainties related to cost and demand for a particular product. He assumes that the total cost per month could be anywhere between $150,000 and $200,000 with equal likelihood. He also assumes that the demand is normally distributed with a mean of 5,000 items per month and a standard deviation of 1,000. Each item is sold for $95. a) Use the random numbers in the following table to simulate the costs, revenues and profits per month. Use Random Number A to generate the costs and Random Number B to generate the revenues per month and then calculate the profit as the difference between revenues and costs. Complete the table by reporting the minimum, maximum and average profit per month according to this simulation. Trial 1 2 3 4 5 6 7 00 8 9 10 Random A 0.23 0.04 0.14 0.07 0.03 0.67 0.26 0.03 0.83 0.32 Cost Random B 0.75 0.89 0.82 0.33 0.96 0.67 0.46 0.26 0.16 0.75 Revenues Minimum: Maximum: Average: Profit Note that I generated the random numbers for you (independently of each other). So, you don't have to use the "=RAND()" function. b) Can you think of a major flaw in this simulation model?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Assume that the operations manager of a small semi-conductor manufacturer
wants to run a Simulation model to better understand the uncertainties related to
cost and demand for a particular product. He assumes that the total cost per month
could be anywhere between $150,000 and $200,000 with equal likelihood. He also
assumes that the demand is normally distributed with a mean of 5,000 items per
month and a standard deviation of 1,000. Each item is sold for $95.
a) Use the random numbers in the following table to simulate the costs, revenues
and profits per month. Use Random Number A to generate the costs and Random
Number B to generate the revenues per month and then calculate the profit as the
difference between revenues and costs. Complete the table by reporting the
minimum, maximum and average profit per month according to this simulation.
Trial
1
2
3
4
5
6
7
8
9
10
you
b) Can
Random A
0.23
you
0.04
0.14
0.07
0.03
0.67
0.26
0.03
0.83
0.32
Cost
Random B
0.75
0.89
0.82
0.33
0.96
0.67
0.46
0.26
0.16
0.75
Revenues
Minimum:
Maximum:
Average:
Note that I generated the random numbers for you (independently of each other).
So,
don't have to use the "=RAND()" function.
think of a major flaw in this simulation model?
Profit
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