Question: In class lecture, we developed a simple spreadsheet model for computing profit in Excel. Use this profit model to implement a financial simulation model for

In class lecture, we developed a simple spreadsheet model for computing profit in Excel. Use this profit model to implement a financial simulation model for a new product proposal and determine a distribution of profits using the distribution below for the demand, unit cost, and fixed cost. Price is fixed at $1,000. Demand is unknown and follows a normal distribution with a mean of 150 and a standard deviation of 20. Fixed costs are uniformly distributed between $45,000 and $55,000. Unit costs are also variable and follow the following distribution:

Unit Cost

Probability

$400

0.20

$600

0.40

$700

0.25

$800

0.15

Simulate this model for 50 trials and a production quantity of 200. What is the average profit and what is the standard deviation of profit?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Mathematics Questions!