Hint(s) Check My Work (All answers were generated using 1,000 trials and native Excel functionality.) The management of Madeira Computing is considering the introduction of a wearable electronic device with the functionality of a laptop computer and phone. The fixed cost to launch this new product is $300,000. The variable cost for the product is expected to be between $192 and $288, with a most likely value of $240 per unit. The product will sell for $360 per unit. Demand for the product is expected to range from 0 to approximately 20,000 units, with 4,000 units the most likely. (a) Develop a what if spreadsheet model computing profit for this product in the base case, worst case, and best case scenarios If your answer is negative, use minus sign Best-case profit Worst case profit Base-case profit S (b) Model the variable cost as a uniform random vanable with a minimum of $192 and a maximum of $288. Model the product demand as 1,000 times the value of a gamma random variable with an alpha parameter of 3 and a beta parameter of 2. Construct a simulation model to estimate the average profit and the probability that the project will result in a loss. Round your answers to the nearest whole number. Average Profit Probability of a Loss 76 (c) What is your recommendation regarding whether to launch the product? The average profit is fairly high and the probability of a lass is less than 25%. Thus, Madeira Computing may want to launch the product if they have low risk tolerance.

Essentials of Business Analytics (MindTap Course List)
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ISBN:9781305627734
Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Chapter15: Decision Analysis
Section: Chapter Questions
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Check My Work
(All answers were generated using 1,000 trials and native Excel functionality.)
The management of Madeira Computing is considering the introduction of a wearable electronic device with the functionality of a laptop computer and phone. The fixed cost to launch this new product is $300,000. The variable cost for the product is expected to be between $192
and $288, with a most likely value of $240 per unit. The product will sell for $360 per unit. Demand for the product is expected to range from 0 to approximately 20,000 units, with 4,000 units the most likely.
(a) Develop a what if spreadsheet model computing profit for this product in the base case, worst case, and best case scenarios
If your answer is negative, use minus sign
Best-case profit
Worst case profit
Base-case profit
S
(b) Model the variable cost as a uniform random vanable with a minimum of $192 and a maximum of $288. Model the product demand as 1,000 times the value of a gamma random variable with an alpha parameter of 3 and a beta parameter of 2. Construct a simulation model to estimate the average
profit and the probability that the project will result in a loss.
Round your answers to the nearest whole number.
Average Profit
Probability of a Loss
76
(c) What is your recommendation regarding whether to launch the product?
The average profit is fairly high
and the probability of a lass is less
than 25%. Thus, Madeira Computing may
want to launch the product if they have low risk tolerance.
Transcribed Image Text:Hint(s) Check My Work (All answers were generated using 1,000 trials and native Excel functionality.) The management of Madeira Computing is considering the introduction of a wearable electronic device with the functionality of a laptop computer and phone. The fixed cost to launch this new product is $300,000. The variable cost for the product is expected to be between $192 and $288, with a most likely value of $240 per unit. The product will sell for $360 per unit. Demand for the product is expected to range from 0 to approximately 20,000 units, with 4,000 units the most likely. (a) Develop a what if spreadsheet model computing profit for this product in the base case, worst case, and best case scenarios If your answer is negative, use minus sign Best-case profit Worst case profit Base-case profit S (b) Model the variable cost as a uniform random vanable with a minimum of $192 and a maximum of $288. Model the product demand as 1,000 times the value of a gamma random variable with an alpha parameter of 3 and a beta parameter of 2. Construct a simulation model to estimate the average profit and the probability that the project will result in a loss. Round your answers to the nearest whole number. Average Profit Probability of a Loss 76 (c) What is your recommendation regarding whether to launch the product? The average profit is fairly high and the probability of a lass is less than 25%. Thus, Madeira Computing may want to launch the product if they have low risk tolerance.
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