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?
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