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Profitability of New Product. The management of Brinkley Corporation is interested in using simulation to estimate the profit per unit for a new product. The

Profitability of New Product. The management of Brinkley Corporation is interested in using simulation to estimate the profit per unit for a new product. The selling price for the product will be $45 per unit. Probability distributions for the purchase cost, the labor cost, and the transportation cost are estimated as follows:

Procurement Cost ($)

Probability

Labor Cost ($)

Probability

Transportation Cost ($)

Probability

10

0.25

20

0.10

3

0.75

11

0.45

22

0.25

5

0.25

12

0.30

24

0.35

25

0.30

Construct a simulation model to estimate the average profit per unit. What is a 95% confidence interval around this average?

Management believes that the project may not be sustainable if the profit per unit is less than $5. Use simulation to estimate the probability that the profit per unit will be less than $5. What is a 95% confidence interval around this proportion?

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