c. Why is the simulation approach to risk analysis preferable to generating a variety of what-if scenarios? d. Management believes the project may not be sustainable if the profit per unit is less than $10. Use simulation to estimate the probability the profit per unit will be less than $10. If required, round your answer to one decimal place.
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Define the variables: In this case, the profit per unit is the variable we want to analyze. We need to identify the factors that affect the profit per unit, such as production cost, selling price, demand, etc. Show more…
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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 $45 per unit. Probability distributions for the purchase cost, the labor cost, and the transportation cost are estimated as follows: Procurement Cost ($) Probability Labor Cost ($) Probability Transportation Cost ($) Probability 10 0.25 20 0.10 3 0.75 11 0.45 22 0.25 5 0.25 12 0.30 24 0.35 25 0.30 1. Compute profit per unit for base-case (most likely), worst-case, and best-case scenarios. Base Case using most likely costs Profit = Worst Case Profit = Best Case Profit = 2. Construct a simulation model to estimate the mean profit per unit. The average profit from the simulation model should be approximately: 3. Why is the simulation approach to risk analysis preferable to generating a variety of what-if scenarios? [write your paragraph here] 4. Management believes that the project may not be sustainable if the profit per unit is less than $5. Use simulation to estimate the probability that the profit per unit will be less than $5. [write your paragraph here]
Lucas F.
(All answers were generated using 1,000 trials and native Excel functionality.) 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 $45 per unit. Probability distributions for the purchase cost, the labor cost, and the transportation cost are estimated as follows: Procurement Cost ($) Probability Labor Cost ($) Probability Transportation Cost ($) Probability 10 0.2 18 0.25 2 0.74 12 0.45 20 0.1 5 0.26 13 0.35 22 0.35 25 0.3 (a) Compute profit per unit for base-case, worst-case, and best-case. Profit per unit for base-case: $ Profit per unit for worst-case: $ Profit per unit for best-case: $ (b) Construct a simulation model to estimate the mean profit per unit. If required, round your answer to the nearest cent. Mean profit per unit = $ (c) Why is the simulation approach to risk analysis preferable to generating a variety of what-if scenarios? The input in the box below will not be graded, but may be reviewed and considered by your instructor. (d) Management believes that 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. If required, round your answer to a one decimal digit percentage. %
Sri K.
Writing. In a simulation, how do equally likely outcomes help you represent the probability distribution?
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