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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 $46 per unit. Probability distributions for the purchase cost, the labor cost, and the transportation cost are estimated in the following table. Procurement Cost($) $ 10 11 $ 12 Probability 0.25 0.45 0.30 Labor Cost ($) 20 22 24 25 Probability 0.10 0.25 0.35 (a) Compute profit (in $) per unit for the base-case scenario. /unit 0.30 (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

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 $46 per unit. Probability distributions for the purchase cost, the labor cost, and the transportation cost are estimated in the following table. Procurement Cost($) $ 10 11 $ 12 Probability 0.25 0.45 0.30 Labor Cost ($) 20 22 24 25 Probability 0.10 0.25 0.35 (a) Compute profit (in $) per unit for the base-case scenario. /unit 0.30 (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

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 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 $46 per unit. Probability distributions for the purchase cost, the labor cost, and the transportation cost are estimated in the following table. Procurement Cost($) (c) 10 11 12 (f) Probability 0.25 0.45 0.30 Labor Cost ($) 20 22 24 25 Probability 0.10 0.25 0.35 (a) Compute profit (in $) per unit for the base-case scenario. /unit 0.30 (b) Compute profit (in $) per unit for the worst-case scenario. /unit 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. 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.)
Transcribed Image Text: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 $46 per unit. Probability distributions for the purchase cost, the labor cost, and the transportation cost are estimated in the following table. Procurement Cost($) (c) 10 11 12 (f) Probability 0.25 0.45 0.30 Labor Cost ($) 20 22 24 25 Probability 0.10 0.25 0.35 (a) Compute profit (in $) per unit for the base-case scenario. /unit 0.30 (b) Compute profit (in $) per unit for the worst-case scenario. /unit 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. 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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