Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Infinity Co. sells virtual reality (VR) goggles, particularly targeting customers who like to play video games. Infinity procures each pair of goggles for $150

Infinity Co. sells virtual reality (VR) goggles, particularly targeting customers who like to play video 

Infinity Co. sells virtual reality (VR) goggles, particularly targeting customers who like to play video games. Infinity procures each pair of goggles for $150 from its supplier and sells each pair for $300. Monthly demand for the VR goggles is normally distributed with a mean of 160 units and a standard deviation of 40 units. At the beginning of each month, Infinity orders enough goggles to bring the inventory level up to 140 goggles. If the monthly demand is less than 140, Infinity pays $20 per pair of goggles that remains in inventory. If the monthly demand exceeds 140, Infinity sells only the 140 pairs in stock. Infinity assigns a shortage cost of $40 for each unit of demand that is unsatisfied to represent a loss-of-goodwill among its customers. Management would like to use a simulation model to analyze this situation. (Hint: use 1,000 simulation trials) a. Construct a simulation model to estimate the average monthly profit. b. What is the range (i.e., min and max) of the expected average monthly profit? c. What is the proportion of months in which demand is completely satisfied? Parameters Selling price Acquisition cost Holding cost Shortage cost Replenishment level Demand Model Units sold Excess inventory Unmet demand Revenue Acquisition cost Holding cost Shortage cost Profit Satisfied demand? 1 Simulation trials Profit 2 3 4 $ 5 6 $ $ 300 150 20 40 140 per goggle per goggle per goggle per goggle Satisfied demand? Summary Statistics Min Profit Max Profit Mean Profit St Dev Profit Count #Satisfied Demand Prob (Satisf.Demand)

Step by Step Solution

3.52 Rating (152 Votes )

There are 3 Steps involved in it

Step: 1

Simulation Model for VR Goggle Sales Parameters Selling price per goggle 300 Acquisition cost per go... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing The Art And Science Of Assurance Engagements

Authors: Alvin A. Arens, Randal J. Elder, Mark S. Beasley, Chris E. Hogan, Joanne C. Jones

15th Canadian Edition

0136692087, 9780136692089

More Books

Students also viewed these Accounting questions

Question

What type of office space and equipment are provided?

Answered: 1 week ago