A company must determine the proper capacity level for the next five years for its new electric car. Capacity levels of 30,000, 40,000, 50,000, 60,000, and 70,000 units are under consideration. The capacity level is set at the beginning of year one and remains constant for the remainder of the five years. Each unit of capacity provides the potential to produce one car per year . It costs $10,000 to build a unit of capacity and the cost is charged equally over the next five years. It also costs $400 per year to maintain a unit of capacity (whether or not it is used).

So, installing 40,000 units of capacity costs 40,000*10,000 = 400,000,000/5 = $80,000,000 per year for the fixed cost and 40,000*400 = $16,000,000 per year for the maintenance cost.

Each car sells for $14,000 and incurs a variable production cost of $10,000. The annual demand for the electric car during each of the next five years is believed to be normally distributed with mean 50,000 and standard deviation 10,000. The company is working with a five-year planning horizon. You can assume that the company never produces more than demand, so there is never any inventory to carry over from year to year.

A) Setup the experiment to investigate a capacity level of 60,000 units for five years. Run 1000 replications What is the total average profit earned over that period?

B) Use a Data Table to compare the five possible capacity levels between 30,000 and 70,000. What capacity would you reommend? Why?