MasterTech is a new software company that develops and markets productivity software for municipal government applications. Net sales are uniformly distributed between $$600,000$ and $$1,200,000.$ Cost of sales is normally distributed with a mean of $$540,000$ and a standard deviation of $$20,000.$ Selling expenses has a fixed component of that is uniformly distributed between $$75,000$ and $$110,000.$ Administrative expenses are normal with a mean of $$50,000$ and standard deviation of $$3,500.$ Variable expenses are estimated to be $7\%$ of net sales and interest expenses are $$10,000.$ The company is taxed at a $50\%$ rate and the company is interested in a risk profile of net income.

Net income can be found using the following set of equations:

Gross profit $=$ net sales $$ cost of sales

Net operating profit $=$ gross profit $$ administrative expenses $$ selling expenses

Net income before taxes $=$ net operating profit $$ interest expenses

Net income $=$ net income before taxes $$ taxes

The simulation was run in SPSS with the following output:

Descriptive Statistics of Scale Targets

Mean

Std$)$ Deviation

Median

Min

Max

$95\%$ Confidence Interval for Mean

Percentiles

Lower

Upper

$5\mathrm{.}0\%$

$25\mathrm{.}0\%$

$50\mathrm{.}0\%$

$75\mathrm{.}0\%$

$95\mathrm{.}0\%$

NetIncome

$72205\mathrm{.}5$

$81402\mathrm{.}05$

$72171\mathrm{.}6$

$-97880.$

$246436.$

$71483\mathrm{.}506$

$72927\mathrm{.}575$

$-54395\mathrm{.}7$

$2108\mathrm{.}7$

$72171\mathrm{.}6$

$141938\mathrm{.}6$

$198118\mathrm{.}7$

Master tech Probability Density Graph

Mastertech Target Income Chart

Your boss would like you to address the following concerns:

How confident are you that MasterTech will earn at least $$75,000$ in net income?

How much of the variance in net income in attributable to uncertainty in net sales?

What is the maximum net income you earned after running the simulation?

The $25$th percentile for net income is $$2108\mathrm{.}791,$ what does that tell you?

The $95$th percentile for net income is $$198118\mathrm{.}726,$ what does that tell you?

QNT$550$Test$3$mastertechCharewx.png

QNT$550$Test$3$mastertechChareuw.png