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The management of a company is interested in using simulation to estimate the profit per unit for a new product. The selling price for the product will be $45 per unit. Probability distributions for the purchase cost, the labor cost, and the transportation cost are estimated as follows: Labor Transportation Cost ($) Procurement Cost Probability Probability Probability Cost ($) ($) 10 0.25 20 0.10 3 0.75 11 0.45 22 0.25 0.25 12 0.30 24 0.35 25 0.30 What is the profit per unit for the best-case scenario?

The management of a company is interested in using simulation to estimate the profit per unit for a new product. The selling price for the product will be $45 per unit. Probability distributions for the purchase cost, the labor cost, and the transportation cost are estimated as follows: Labor Transportation Cost ($) Procurement Cost Probability Probability Probability Cost ($) ($) 10 0.25 20 0.10 3 0.75 11 0.45 22 0.25 0.25 12 0.30 24 0.35 25 0.30 What is the profit per unit for the best-case scenario?

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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The management of a company is interested in using simulation to estimate the profit per unit for a new product. The selling price for the product will be $45 per unit. Probability distributions for the purchase cost, the labor cost, and the transportation cost are estimated as follows: ### Procurement Cost Table - **Cost ($):** 10, 11, 12 - **Probability:** 0.25, 0.45, 0.30 ### Labor Cost Table - **Cost ($):** 20, 22, 24, 25 - **Probability:** 0.10, 0.25, 0.35, 0.30 ### Transportation Cost Table - **Cost ($):** 3, 5 - **Probability:** 0.75, 0.25 **Question:** What is the profit per unit for the best-case scenario? For the best-case scenario, the costs are the lowest possible. Therefore, select the minimum procurement cost ($10), labor cost ($20), and transportation cost ($3). The total cost is $10 + $20 + $3 = $33. Given the selling price is $45 per unit, the profit per unit in the best-case scenario is $45 - $33 = $12.
Transcribed Image Text:The management of a company is interested in using simulation to estimate the profit per unit for a new product. The selling price for the product will be $45 per unit. Probability distributions for the purchase cost, the labor cost, and the transportation cost are estimated as follows: ### Procurement Cost Table - **Cost ($):** 10, 11, 12 - **Probability:** 0.25, 0.45, 0.30 ### Labor Cost Table - **Cost ($):** 20, 22, 24, 25 - **Probability:** 0.10, 0.25, 0.35, 0.30 ### Transportation Cost Table - **Cost ($):** 3, 5 - **Probability:** 0.75, 0.25 **Question:** What is the profit per unit for the best-case scenario? For the best-case scenario, the costs are the lowest possible. Therefore, select the minimum procurement cost ($10), labor cost ($20), and transportation cost ($3). The total cost is $10 + $20 + $3 = $33. Given the selling price is $45 per unit, the profit per unit in the best-case scenario is $45 - $33 = $12.
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