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In: Statistics and Probability

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

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 $50 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 0.45 20 0.2 2 0.75
12 0.25 22 0.25 4 0.25
13 0.3 25 0.35
27 0.2
  1. Compute profit per unit for the base-case, worst-case, and best-case.

    Profit per unit for the base-case: $___  

    Profit per unit for the worst-case: $___  

    Profit per unit for the best-case: $___  
  2. Construct a simulation model to estimate the mean profit per unit. If required, round your answer to the nearest cent.

    Mean profit per unit = $___  
  3. Why is the simulation approach to risk analysis preferable to generating a variety of what-if scenarios?


  4. Management believes the project may not be sustainable if the profit per unit is less than $9. Use simulation to estimate the probability the profit per unit will be less than $9. If required, round your answer to one decimal place.

    ____%

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