Please read the problems carefully, build a simulation model for each problem and answer

each part accordingly. Let me know if you have any questions!

In preparing for the upcoming holiday season, Fresh Toy Company $($ITC$)$ designed a new

doll called The Dougie that teaches children how to dance. The fixed cost to produce the doll

is $$100,000.$ The variable cost, which includes material, labor, and shipping costs, is $$34$ per

doll. During the holiday selling season, FTC will sell the dolls for $$42$ each. If FTC overpro$-$

Juces the dolls, the excess dolls will be sold in January through a distributor who has agreed

to pay FTC $$10$ per doll. Demand for new toys during the holiday selling season is extremely

uncertain. Forecasts are for expected sales of $60,000$ dolls with a standard deviation of $15,000.$

The normal probability distribution is assumed to be a good description of the demand. FTC

has tentatively decided to produce $60,000$ units $($the same as average demand$),$ but it wants to

conduct an analysis regarding this production quantity before finalizing the decision.

a$.$ Create a what$-$if spreadsheet model using a formula that relate the values of production

quantity, demand, sales, revenue from sales, amount of surplus, revenue from sales of

surplus, total cost, and net profit. What is the profit corresponding to average demand

units$)?$

b$.$ Modeling demand as a normal random variable with a mean of $60,000$ and a standard

deviation of $15,000,$ simulate the sales of the Dougie doll using a production quantity

of $60,000$ units. What is the estimate of the average profit associated with the produc$-$

tion quantity of $60,000$ dolls? How does this compare to the profit corresponding to the

average demand $($as computed in part $($a$))?$

c$.$ Before making a final decision on the production quantity, management wants an anal$-$

ysis of a more aggressive $70,000-$unit production quantity and a more conservative

$50,000-$unit production quantity. Run your simulation with these two production quan$-$

tities. What is the mean profit associated with each?

d$.$ In addition to mean profit, what other factors should FTC consider in determining a

production quantity? Compare the three production quantities $,$ and

$70,000$ using all these factors. What trade$-$offs occur? What is your recommendation?