Create a model to calculate the profits for a company making
this product. The formula for profits is:
Profits
= revenue – fixed costs – variable costs
Revenue
= unit price * units sold
Variable
costs = unit cost * quantity produced
Units
sold (you need to figure out for yourself)
Unit
price $50
Unit
cost $25
Fixed
cost $550,000
Quantity
produced 55,000
Uncertain Demand
Case Probability Quantity
Recession 0.3 45,000
Base-case 0.5 55,000
Boom 0.2 65,000
Use this model to create a scenario summary of the demand
quantity and profits.
Use the spreadsheet you have above, create
a data table in which the input variable to be changed is demand
and show the resulting profit. The values for demand are:
Demand Profit
30,000 ???
35,000 ???
40,000 ???
45,000 ???
50,000 ???
55,000 ???
60,000 ???
65,000 ???
given the above model and data (and the probabilities), run
twenty (20) experiments for the uncertain demand and show the
twenty values for the resulting profits. What is the expected value
of the profit from your experiments?
