Question
PortaCom manufactures notebook computers and related equipment. PortaCom's product design group developed a prototype for a new high-quality portable printer. The new printer features an
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PortaCom manufactures notebook computers and related equipment. PortaCom's product design group developed a prototype for a new high-quality portable printer. The new printer features an innovative design and has the potential to capture a significant share of the portable printer market. Preliminary marketing and financial analyses provided the following selling price, first-year administrative cost, and first-year advertising cost:
Selling price = $248 per unit Administrative cost = $450,000 Advertising cost = $550,000 In the simulation model for the PortaCom problem, the preceding values are constants and are referred to as parameters of the model.
- An engineer on the product development team believes that first-year sales for the new printer will be 18,000 units. Using estimates of $41 per unit for the direct labor cost and $92 per unit for the parts cost, what is the first-year profit using the engineer's sales estimate? $ fill in the blank 1
- The financial analyst on the product development team is more conservative, indicating that parts cost may well be $102 per unit. In addition, the analyst suggests that a sales volume of 10,500 units is more realistic. Using the most likely value of $41 per unit for the direct labor cost, what is the first-year profit using the financial analyst's estimates? $ fill in the blank 2
- Why is the simulation approach to risk analysis preferable to generating a variety of what-if scenarios such as those suggested by the engineer and the financial analyst? A simulation
willwill not
provide probability information about the various profit levels whereas a what-if analysiswillwill not
provide probability information about the various profit outcomes.
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