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A manufacturer buys a component at 180 per unit, but they make it ready to sell only after they receive order from customers. As the
A manufacturer buys a component at 180 per unit, but they make it ready to sell only after they receive order from customers. As the manufacturer takes profit on each component, they fix the component's selling price at 300 per unit. The manufacturer faces uncertain demand which generally follows normal distribution with mean of 300 and standard deviation of 100. In the end of the year if all purchased components are not used, the manufacturer has to dispose it at 50. Build a simulation model, run 3,000 iterations, and estimate (a) an appropriate number of components the manufacturer should order, (b) average profit for manufacturer, (c) its standard deviation, and (d) 95% confidence interval for the estimated profit. (e) What is the chance that the manufacturer will earn a profit of 20,000 and above? (f) How do you see risk and reward trade-off
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