The management of Brinkley Corporation is interested in using simulation to estimate the profit per unit for a new product. The selling price for the product will be $45 per unit. Probability distributions for the purchase cost, the labor cost, and the estimated as follows: Procurement Cost($) 10 11 12 Probability 0.35 0.25 0.45 0.30 Base Case using most likely costs Worst Case Best Case Labor Cost ($) 20 22 24 25 Probability 0.10 0.25 0.35 0.30 Transportation Cost ($) (a) Compute profit per unit for the base-case, worst-case, and best-case scenarios. Profit= $7 Profit = $3 Profit $12 3 ✔/unit ✔ /unit ✔/unit 5 Probability 0.75 0.25 (b) Construct a simulation model to estimate the mean profit per unit. (Use at least 1,000 trials.) $6.95✔ (c) Why is the simulation approach to risk analysis preferable to generating a variety of what-if scenarios? Simulation will provide a distribution ✓of the profit per unit values which can then be used to find the probability of an unacceptably low profit. (d) 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.) X
The management of Brinkley Corporation is interested in using simulation to estimate the profit per unit for a new product. The selling price for the product will be $45 per unit. Probability distributions for the purchase cost, the labor cost, and the estimated as follows: Procurement Cost($) 10 11 12 Probability 0.35 0.25 0.45 0.30 Base Case using most likely costs Worst Case Best Case Labor Cost ($) 20 22 24 25 Probability 0.10 0.25 0.35 0.30 Transportation Cost ($) (a) Compute profit per unit for the base-case, worst-case, and best-case scenarios. Profit= $7 Profit = $3 Profit $12 3 ✔/unit ✔ /unit ✔/unit 5 Probability 0.75 0.25 (b) Construct a simulation model to estimate the mean profit per unit. (Use at least 1,000 trials.) $6.95✔ (c) Why is the simulation approach to risk analysis preferable to generating a variety of what-if scenarios? Simulation will provide a distribution ✓of the profit per unit values which can then be used to find the probability of an unacceptably low profit. (d) 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.) X
Advanced Engineering Mathematics
10th Edition
ISBN:9780470458365
Author:Erwin Kreyszig
Publisher:Erwin Kreyszig
Chapter2: Second-order Linear Odes
Section: Chapter Questions
Problem 1RQ
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please, i do not know why the last part of the question is incorrect. please give a clear answer
Transcribed Image Text:The management of Brinkley Corporation is interested in using simulation to estimate the profit per unit for a new product. The selling price for the product will be $45 per unit. Probability distributions for the purchase cost, the labor cost, and the transportation cost are
estimated as follows:
Procurement
Cost($)
10
11
12
0.35
Probability
0.25
0.45
0.30
Labor
Cost ($)
20
22
24
25
Probability
0.10
0.25
0.35
0.30
Transportation
Cost ($)
3
(a) Compute profit per unit for the base-case, worst-case, and best-case scenarios.
Base Case using most likely costs
Profit = $7
Worst Case
Profit= $3
Best Case
Profit $ 12
/unit
/unit
/unit
5
Probability
0.75
0.25
(b) Construct a simulation model to estimate the mean profit per unit. (Use at least 1,000 trials.)
$6.95
(c) Why is the simulation approach to risk analysis preferable to generating a variety of what-if scenarios?
Simulation will provide a distribution
of the profit per unit values which can then be used to find the probability
of an unacceptably low profit.
(d) 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.)
X
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