Problem 12-02 (Algorithmic)

The management of Madeira Manufacturing Company is considering the introduction of a new product. The fixed cost to begin the production of the product is $35,000. The variable cost for the product is expected to be between $14 and $20 with a most likely value of $16 per unit. The product will sell for $60 per unit. Demand for the product is expected to range from 400 to 1400 units, with 700 units the most likely demand.

Let

c = variable cost per unit

x = demand

A) Develop the profit model for this product. Enter your answer in the form of an expression. (Example: (c+10)x+800)

Profit = ___

B) Provide the base-case, worst-case and best-case analyses. For those boxes in which you must enter subtractive or negative numbers use a minus sign. (Example: -300)

Base case:	Profit =	$
Worst case:	Profit =	$
Best case:	Profit =	$

C) Discuss why simulation would be desirable. A simulation provides [or] doesn't provide the probability of each scenario. (Choose one)

Thank you.