Question: Can you please give the caculation method on Microsoft Excel for this question? A hardware company sells a lot of low-cost, high- volume products. For
Can you please give the caculation method on Microsoft Excel for this question?
A hardware company sells a lot of low-cost, high- volume products. For one such product, it is equally likely that annual unit sales will be low or high. If sales are low (30,000), the company can sell the product for $20 per unit. If sales are high (70,000), a competitor will enter and the company will be able to sell the product for only $15 per unit. The variable cost per unit has a 20% chance of being $10, a 60% chance of being $11, and a 20% chance of being $12. Annual fixed costs are $20,000.
a. Use simulation to estimate the companys expected annual profit.
b. Find a 95% interval for the companys annual profit, that is, an interval such that about 95% of the actual profits are inside it.
c. Now suppose that annual unit sales, variable cost, and unit price are equal to their respective expected valuesthat is, there is no uncertainty. Determine the companys annual profit for this scenario.
d. Can you conclude from the results in parts a and c that the expected profit from a simulation is equal to the profit from the scenario where each input assumes its expected value? Explain.
(Practical Management Science by Wayne L. Winston)
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
