The high-end camera company, Cankon, has recently achieved a breakthrough technological development, and they are planning to bring the technology to the market with the camera model 6GM3 as soon as possible. Cankon's management plans to sell the model 6GM3 in the market for two years before phasing it out for a newer model, and they believe that the uncertain demand for Year 1 will follow a normal distribution with mean 600,000 and standard deviation 150,000. For Year 2, the company thinks that early adopters will leave the market as they would have purchased the 6GM3s, so the demand is likely to reduce by a certain percentage. However, the percent of demand reduction is uncertain, but the management believes that it is equally likely to be in the continuous range between 15% to 20%. Therefore, regardless of the order quantity that the company will place to its production partner in Year 1, their order quantity in Year 2 will be reduced from Year 1 by 17.5%. After discussion with its production partner and internal departments, the overall unit cost is $340 and the annual fixed cost is $1million. Cankon plans to price $480 during both regular selling season (both Year 1 and Year 2), and any unsold 6GM3s from Year 1 can be carried by retailers to Year 2 with no additional holding cost and no storage restriction to the company. However, retailers ask that any 6GM3 unsold by Year 2 will need to be discounted heavily to $192, which is the clearance price that they believe will get rid of all remaining stocks. Cankon is considering 3 ordering quantities for Year 1: 500,000 units, 600,000 units, and 700,000 units.

Assume that the interest rate for NPV is negligible (as it is currently in real life), so there is no need to consider NPV, just the total profit and the profit in each Year.

1. Run 500 iterations of the simulation model with uncertainty. What is the average of Year 1 profit if Year 1 order quantity is 600,000?

2.

Run 500 iterations of the simulation model with uncertainty. What is the average of the total profit for both years (including any possible discount sales revenue) if Year 1 order quantity is 700,000?

3. Run 500 iterations of the simulation model with uncertainty. Which of the ordering quantity under consideration will provide the highest Year 1 profit?