Develop a worksheet simulation for the following problem. The management of Madeira Manufacturing Company is considering the introduction of a new product. The fixed cost to begin the production of the product is $30,000. The variable cost for the product is uniformly distributed between $16 and $24 per unit. The product will sell for $50 per unit. Demand for the product is best described by a normal probability distribution with a mean of 1200 units and a standard deviation of 300 units. Develop a spreadsheet simulation similar to Figure. Use 500 simulation trials to answer the following questions:
Figure
EXCEL WORKSHEET FOR THE PORTACOM PROBLEM

a. What is the mean profit for the simulation?
b. What is the probability the project will result in a loss?
c. What is your recommendation concerning the introduction of theproduct?

Transcribed Image Text:

1 PortaCom Risk Analysis 3 Selling Price per Unit 4 Administrative Cost $249 $400,000 5 Advertising Cost 7 Direct Labor Cost 9 Random No. Random No. Cost per Unit Largest Value Parts Cost (Uniform Distribution Smallest Value wer $100 10 0.0 0.3 0.7 0.9 0.3 0.7 0.9 12 13 645 Demand (Normal Distribution) Mean Std Deviation 15000 4500 15 16 17 Simulation Trials 18 First-Year Demand 17,366 2,900 20,686 0.888 14,259 Direct Labor Parts 20 21 Trial Cost per Unit Cost per Unit Profit 85.36 91.68 9335 47 1,025,570 $461,828 S1,288,906 $169,807 S648,911 ($71.739) $1,110,952 $703.118 $557,652 $1,056,847 23 24 4. 43 $88.36 516 517 518 519 520 521 522 496 497 498 499 500 45 94.38 $90.85 90.37 92.50 19.257 14,920 13,471 18.614 43 Summary Statistics Mean Profit Standard Deviation 524 525 526 527 $698,457 $520,485 ($785,234) S2.367,058 Maximum Profit Number of Losses Probability of Loss 0.1020