Business, 12.03.2021 15:30, jessicamcummins

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 49 dollars per unit. Probability distributions for the purchase cost, the labor cost, and the transportation cost are estimated as follows: Procurement Probability Labor Cost ($) Probability Transportation Cost ($) Probability
Cost ($)
11 0.25 22 0.15 4 0.65
12 0.35 24 0.25 5 0.35
13 0.4 25 0.35
27 0.25

Required:
a. Compute profit per unit for the base-case, worst-case, and best-case.
b. Construct a simulation model to estimate the mean profit per unit. If required, round your answer to the nearest cent.
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 $11. Use simulation to estimate the probability the profit per unit will be less than $11.

Answers: 3

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The management of Brinkley Corporation is interested in using simulation to estimate the profit per...