The management of Brinkley Corporation is interested in using simulation to estimate the profit (in $) per unit for a new product. The selling price for the product will be $44 per unit. Probability distributions for the purchase cost, the labor cost, and the transportation cost are estimated in the following table. Procurement Cost($) 10 11 12 $ Probability 0.25 0.45 0.30 Labor Cost ($) 20 22 24 25 Probability 0.10 0.25 0.35 0.30 (a) Compute profit (in $) per unit for the base-case scenario. /unit (b) Compute profit (in $) per unit for the worst-case scenario. $ /unit (c) Compute profit (in $) per unit for the best-case scenario. /unit Transportation Cost ($) 3 5 Probability 0.75 0.25 (d) Construct a simulation model to estimate the mean profit (in $) per unit. (Use at least 1,000 trials. Round your answer to two decimal places.) $

The management of Brinkley Corporation is interested in using simulation to estimate the profit (in $) per unit for a new product. The selling price for the product will be $44 per unit. Probability distributions for the purchase cost, the labor cost, and the transportation cost are estimated in the following table. Procurement Cost($) 10 11 12 $ Probability 0.25 0.45 0.30 Labor Cost ($) 20 22 24 25 Probability 0.10 0.25 0.35 0.30 (a) Compute profit (in $) per unit for the base-case scenario. /unit (b) Compute profit (in $) per unit for the worst-case scenario. $ /unit (c) Compute profit (in $) per unit for the best-case scenario. /unit Transportation Cost ($) 3 5 Probability 0.75 0.25 (d) Construct a simulation model to estimate the mean profit (in $) per unit. (Use at least 1,000 trials. Round your answer to two decimal places.) $

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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Question

Answer the given question with a proper explanation and step-by-step solution.

The management of Brinkley Corporation is interested in using simulation to estimate the profit (in $) per unit for a new product. The selling price for the product will be $44 per unit. Probability distributions for the purchase cost, the labor cost, and the
transportation cost are estimated in the following table.
$
$
Procurement
Cost ($)
10
$
11
12
$
Probability
0.25
0.45
0.30
Labor
Cost ($)
20
22
24
25
Probability
0.10
(a) Compute profit (in $) per unit for the base-case scenario.
/unit
0.25
0.35
(b) Compute profit (in $) per unit for the worst-case scenario.
/unit
0.30
(c) Compute profit (in $) per unit for the best-case scenario.
/unit
Transportation
Cost ($)
3
5
Probability
0.75
0.25
(d) Construct a simulation model to estimate the mean profit (in $) per unit. (Use at least 1,000 trials. Round your answer to two decimal places.)
(e) Why is the simulation approach to risk analysis preferable to generating a variety of what-if scenarios?
Simulation will provide ---Select---
✓of the profit per unit values which can then be used to find |---Select---
of an unacceptably low profit.
(f) Management believes the project may not be sustainable if the profit per unit is less than $5. Use simulation to estimate the probability the profit per unit will be less than $5. (Round your answer to three decimal places.)

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